Sharechat Logo

NZ dollar off early highs but rangebound ahead of inflation data

Monday 17th July 2017

Text too small?

The New Zealand dollar was off its highs after some comments from a central bank deputy governor and ahead of Tuesday's second-quarter domestic inflation data. 

The kiwi traded at 73.30 US cents as at 5pm in Wellington versus 73.42 US cents as at 8am in Wellington and 73.45 cents in late New York trading on Friday.  It got a solid lift overnight Friday from weak US inflation, retail sales and consumer sentiment figure but ground lower over the session. The trade-weighted index was at 77.97 from around  78.11 late Friday. 

"It's still range-bound but it's off its highs," said ANZ senior economist Phil Borkin. Some early risk aversion in Asian equity markets coupled with comments from Reserve Bank deputy governor Geoff Bascand took some of the shine off, he said. 

Bascand said a large improvement in New Zealand’s net foreign liabilities as a share of gross domestic product (NFL-GDP) makes the economy less vulnerable to shocks. He said one "striking feature" of the improvement is that it has occurred despite the real exchange rate being high over much of the period. Typically a higher exchange rate would contribute to widening the current account deficit but "the improvement in the NFL-GDP suggests that the exchange rate might be more sustainable than previously assumed," he said. 

In some ways that was an acknowledgement, the currency needs to be where it is but he added the caveat that from a growth point of view, a lower exchange rate would help rebalance growth towards the tradables sector, said Borkin. 

"The kiwi was already under some pressure and that helped it along its way," said Borkin.

He said, however, the main event risk for the currency is tomorrow's domestic inflation data. Economists expect inflation was 0.2 percent in the three months ended June 30, for an annual rate of 1.9 percent, according to the median in a poll of 15 economists surveyed by Bloomberg. That would be below the central bank's projection of inflation of 0.3 percent in the second quarter for an annual rise of 2.1 percent.

"Any surprise will see a bit of currency volatility, but I'd be surprised if it pushes on too much unless its a really significant surprise," said Borkin. 

The kiwi slipped to 63.93 euro cents from 64.06 cents in New York on Friday and traded at 82.53 yen from 82.67 yen. It fell to 4.9615 yuan from 4.9756 yuan and traded at 55.97  British pence from 56.11 pence. The kiwi traded at 93.81 Australian cents from 93.75 cents.

New Zealand's two-year swap rate fell 3 basis points to 2.23 while the 10-year swaps fell 2 basis points to 3.33 percent.

(BusinessDesk)

General Finance Advertising  

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.
Bookmark and Share   Printable version
Related News

Powerhouse plans to sell down Invert Robotics stake for $1.3 mln
UPDATE: Economists unimpressed as GDP growth comes in as expected
Chorus plans underwrite for dividend reinvestment programme
NZ net migration up in August, immigration outpaces New Zealanders leaving
UPDATE: Fletcher HR boss Kate Daly jumps ship to BNZ; quarry workers strike
Restaurant Brands second-quarter sales jump 41% on overseas expansion
CBA sells CommInsure, Sovereign to AIA Group for A$3.8 billion
NZ's economy expands 0.8% in 2Q on export, domestic demand
September 21st Morning Report
Fletcher HR, comms boss Kate Daly jumps ship to BNZ; quarry workers strike

IRG See IRG research reports