NZ dollar falls as central bankers eye move to higher interest rates

Friday 30th June 2017

The New Zealand dollar fell as investors rethink the globally low interest rate environment with a Bank of England senior official joining the growing chorus of central bankers musing on the end to ultra-loose monetary policy.

The kiwi dropped to 72.91 US cents as at 8am in Wellington from 73.18 cents yesterday. The trade-weighted index declined to 78.05 from 78.37.

Stocks on Wall Street fell and the yield on 10-year US Treasuries rose 5 basis points to 2.27 percent as investors took on board the growing number of central bankers signalling a move to higher interest rates after extraordinarily loose policies for almost a decade. The US Federal Reserve has already started raising rates as the world's biggest economy continues to show robust growth, and BoE chief economist Andy Haldane is the latest among central banker officials to say higher rates need to be looked at seriously to head off inflation. The European Central Bank yesterday played down comments by president Mario Draghi earlier in the week that had also been seen as 'hawkish'.

"The tonal tide is turning in the central bank halls in London, Frankfurt and DC," ANZ Bank New Zealand senior rates strategist David Croy said in a note. "Haldane’s reiteration overnight that 'we need to look seriously at the possibility of raising interest rates' has added fuel to FX moves, and it is this changing major market central bank vibe that is at the heart of our cautious NZD view."

The kiwi fell to 63.77 euro cents from 64.15 cents yesterday after German inflation was higher than expected, and touched a new three-week low against the British pound trading at 56.08 pence as at 8am from 56.46 pence yesterday.

Domestic data today include May building consents and an employment confidence survey. US inflation figures will also be watched after data showed the world's biggest economy grew an annualised 1.4 percent in the first quarter, revised up from a pace of 1.2 percent.

The kiwi dropped to 94.86 Australian cents from 95.52 cents yesterday as recovering iron ore prices bolster demand for the Aussie dollar. The local currency fell to 4.9489 Chinese yuan from 4.9552 yuan yesterday and dropped to 81.78 yen from 82.10 yen.

(BusinessDesk)

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