Wednesday 4th September 2019
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The New Zealand dollar was little changed, stabilising at higher levels on a combination of technical factors and signs that Australia’s economy may not be as weak as thought.
The kiwi, which has spent most of the week near four-year lows, was trading at 63.34 US cents at 5pm in Wellington from 63.33 cents at 8am. It fell as low as 62.67 cents yesterday. The trade-weighted index was at 70.82 points from 70.86.
“We had key reversals in the Aussie and New Zealand dollars,” after making new lows yesterday and then rebounding strongly, says Tim Kelleher, head of foreign exchange sales at Commonwealth Bank of Australia.
“Technically, that’s a good sign,” he says, although the Australian dollar, bouncing off a 10-year low, rallied more strongly than the kiwi.
Otherwise, “it’s a combination of things,” including Australia yesterday posting a record current account surplus of A$5.9 billion for the June quarter, its first surplus in 44 years.
Kelleher says the surplus was “a rip-snorter. Their economy may be a little stronger than we think.”
Data today showed Australia’s economy slowed to its most sluggish pace since 2009 in the depths of the GFC. It was bang-on expectations but the market still treated it as an excuse to buy Australian dollars.
The Australian economy grew 0.5 percent in the June quarter taking annual growth to 1.4 percent.
Australian Treasurer Josh Frydenberg was talking up the economy, saying the data didn't take into account the 50 basis points worth of interest rate cuts the Reserve Bank of Australia has delivered this year or the full effect of federal income tax cuts.
Frydenberg also said the Australian government is looking at ways it might boost the economy.
Yesterday, the RBA left interest rates unchanged, as expected, and its commentary was less dovish than expected.
“They may well be on hold for the rest of the year now,” Kelleher says, although CBA is still forecasting one more RBA rate cut this year.
The US posting poor manufacturing data for August also assisted the antipodean currencies, while the latest Global Dairy Trade auction outcome wasn’t as bad as expected.
The main GDT index fell 0.4 percent, the seventh fall in the past eight auctions, but the futures market had suggested a bigger fall.
The New Zealand dollar was trading at 93.46 Australian cents from 93.63, at 52.33 British pence from 52.38, at 57.69 euro cents from 57.70, at 67.16 yen from 67.15 and at 4.5380 Chinese yuan from 4.5448.
The two-year swap rate fell to a bid price of 0.8917 percent from 0.8925 yesterday and 10-year swaps fell to 1.1500 percent from 1.1950.
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