NZ dollar little changed ahead of RBNZ's stability report, Fed appearances

Monday 27th November 2017

The New Zealand dollar fell but remained largely rangebound ahead of key events later in the week including the central bank's financial stability report as well as possible comments from the US Federal Reserve.

The kiwi was trading at 68.62 US cents as at 5pm in Wellington versus 68.75 US cents as at 830am and 68.64 cents Friday. The trade-weighted index was at 72.35 from 72.47.

Domestically markets will be watching for the Reserve Bank's six-monthly financial stability report due Wednesday as well as a speech from Finance Minister Grant Robertson early Friday for any clues about the new government's economic plans. Acting central bank governor Grant Spencer's testimony to the parliamentary select committee after the Financial Stability report will also be watched.

In a weekly report, ASB Bank said it expects the housing market and the central bank's macro-prudential toolkit to be under the most scrutiny at this release as the housing market has cooled. It noted the central bank has signaled plans to lay out the process to unwind loan-to-value lending restrictions as housing risks recede.

"The currency has eased off the opening levels, but not by much. It's just a bit of flow, a bit of positioning driving the moves. We are just waiting for a few more details later in the week both domestically and offshore," said ANZ senior economist Phil Borkin.

Offshore, investors are looking ahead to congressional hearings on Federal Reserve Chair nominee Jerome Powell on Tuesday, followed by Fed Chair Janet Yellen's testimony to Congress on the US economic outlook on Wednesday. The Fed also releases its Beige Book on Wednesday

Borkin said any comment from the Federal Reserve will be interesting after the recent minutes, which were viewed as dovish. He said a December rate hike is locked in but "markets will be looking to see how aggressively they want to tighten after that. Markets will be very interested in those kinds of comments." he said.

The kiwi remained under pressure against the euro after strong German business confidence late last week and news reports about possible progress on forming a coalition government. The kiwi was at 57.54 euro cents from 57.66 cents on Friday in Europe and from 58.03 cents in Asia at the end of last week.

It was at 4.5291 yuan from 4.5400 yuan and traded at 90.23 Australian cents from 90.31 cents and at 51.53 British pence from 51.55 pence. It traded at 76.44 yen from 76.70 yen.

New Zealand's two-year swap rate lifted 1 basis point to 2.16 while the 10-year swap rate lifted 3 basis points to 3.12 percent.

(BusinessDesk)

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