NZ dollar little changed as traders await central bank policy meetings

Tuesday 27th October 2015

The New Zealand dollar was little changed as investors took a cautious approach ahead of the Reserve Bank and Federal Reserve policy reviews later this week, which will firm up views on the diverging paths of the two nations' monetary policies.

The kiwi traded at 67.75 US cents at 5pm in Wellington from 67.84 cents at 8am, and 67.81 cents yesterday. The trade-weighted index increased to 72.96 from 72.76 on Friday, with the local market closed on Monday for the Labour Day holiday.

Policy meetings at New Zealand's Reserve Bank and the US Fed will review their respective policies this week, with investors not expecting any move from either authority this month, but hoping for a clearer steer on the future direction for interest rates in each nation. New Zealand's Reserve Bank embarked on an easing cycle earlier this year, and while governor Graeme Wheeler says he has another rate cut up his sleeve, a buoyant Auckland property is one of the factors he's considering when reducing borrowing costs. Meantime, the US is getting closer to its first rate hike in a decade, having slashed rates to zero during the global financial crisis.

"There's not much going on ahead of the RB and FOMC (Federal Open Market Committee) as people bide their time," said Imre Speizer, senior markets strategist at Westpac Banking Corp in Auckland. "The kiwi is still consolidating more than anything else."

Westpac's Speizer said the kiwi may get a boost if the RBNZ's Wheeler stays on hold and reiterates his concerns over the strength of Auckland's housing market when setting monetary policy.

New Zealand's two-year swap rose four basis points to 2.74 percent at 5pm in Wellington and the 10-year swap advanced four basis points to 3.51 percent.

Government data today showed New Zealand's trade deficit unexpectedly widened in September, as falling dairy exports offset gains in international sales of meat, and demand for imported goods remained strong.

The local currency increased to 93.58 Australian cents from 93.40 cents yesterday, and slipped to 4.3030 Chinese yuan from 4.3056 yuan. It fell to 81.69 yen from 82.10 yen yesterday, and declined to 61.21 euro cents from 61.42 cents. It was little changed at 41.11 British pence from 44.20 pence yesterday.

BusinessDesk.co.nz

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