NZ dollar holds above 68 US cents as greenback buoyed on rates, euro woes

Tuesday 21st November 2017

The New Zealand dollar continued to hover around 68 US cents as the greenback was supported by higher US bond yields and as geopolitical concerns weighed on the euro.

The kiwi dollar traded at 68.01 US cents as at 5pm from 68.07 US cents as at 8:30am in Wellington and 68.11 cents late yesterday. The trade-weighted index was at 72.19 from 72.27 yesterday.

The yield on the US two-year Treasury was at a nine-year high 1.755 percent as investors price in more rate hikes from the US Federal Reserve. Chair Janet Yellen is scheduled to speak on Tuesday in New York, while minutes to the last Federal Open Market Committee are due for release on Wednesday. The greenback is getting boosted on two fronts with the prospect of higher rates coinciding with dwindling demand for the euro after coalition talks in Germany broke down.

The New Zealand dollar remains "under a bit of pressure," said ANZ Bank New Zealand senior economist Phil Borkin. Markets have been a bit "jittery" on geopolitical tensions, including a political crisis in Germany after German Chancellor Angela Merkel’s failure to form a three-way coalition government and "NZD doesn't perform as well in a more volatile environment."

The Australian and the New Zealand dollar have also lost ground as their respective central banks are seen as being firmly on hold while the Fed is poised to hike. "Antipodean currencies are out of favor," said Borkin.

New Zealand's two-year swap rate was unchanged at 2.15 percent while 10-year swap rate was unchanged at 3.11 percent.

Looking ahead, Borkin said the overnight GlobalDairyTrade auction will be closely watched. Dairy prices have fallen in the past three auctions and the futures are currently pointing to a slight rise in whole milk powder prices. If the result were to disappoint, it would add to the pressure on the kiwi, he said.

The kiwi traded at 57.95 euro cents from 58.03 cents yesterday and at 90.23 Australian cents from 90.15 cents. It fell to 51.35 British pence from 51.59 pence. The local currency traded at 4.5135 yuan from 4.5186 yuan and rose to 76.55 yen from 76.29 yen.

(BusinessDesk)

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