NZ dollar falls as traders wind back bets on Fed hike in September, helping lift greenback

Thursday 27th August 2015

The New Zealand dollar fell as traders continued to wind back bets that the US Federal Reserve will raise interest rates as soon as September, helping lift US stocks and the greenback.

The kiwi dropped to 64.34 US cents as at 5pm in Wellington from 64.93 cents in late trading yesterday. The trade-weighted index fell to 69.67 from 70.12 yesterday.

New York Federal Reserve chief William Dudley stoked speculation the Fed won't rush to raise interest rates, saying starting the normalisation process at the September FOMC meeting "seems less compelling to me than it was a few weeks ago." Both the Australian and New Zealand dollars fell as the greenback rose, with Australia's currency falling after weaker-than-expected capital spending data.

"They are both struggling - there are plenty of people looking to sell into any rallies," said Mark Johnson, senior dealer at OMF. "Both currencies succumbed to US dollar strength overnight."

Johnson says the kiwi dollar may trade in a range of 64.20 US cents to 64.90 cents in the next 24 hours. "A lot will depend on what happens to equity markets. We're not out of the woods yet."

Key data overnight includes US second-quarter gross domestic product, weekly jobless claims and pending home sales. While there's less expectation of a Fed hike in September, the market is expecting the Reserve Bank to cut the official cash rate a quarter point to its Sept. 10 meeting.

The New Zealand dollar slipped to 90.57 Australian cents from 91.03 cents and traded at 56.65 euro cents from 56.49 cents yesterday. The kiwi rose to 41.53 British pence from 41.35 pence, weakened to 77.138 yen from 77.63 yen and dropped to 4.1210 yuan from 4.1627 yuan.

The two-year swap rate was little changed at 2.79 percent and 10-year swaps were unchanged at 3.57 percent.

BusinessDesk.co.nz

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