NZ dollar falls as global risks abate, lifting greenback

Tuesday 12th September 2017

The New Zealand dollar fell on moderating concerns over North Korea and Hurricane Irma helped lift the greenback against the euro and the yen.

The kiwi fell to 72.27 US cents as at 5pm in Wellington from 72.45 cents late yesterday. The trade-weighted index fell to 75.24 from 75.38.

The US dollar index rose to its highest level since late last week as Hurricane Irma weakened to a tropical storm and the UN Security Council unanimously voted to increase sanctions against North Korea that includes a cap on fuel supplies and a ban on textile exports. With both issues ring-fenced for now, the Chicago Board Options Exchange Volatility Index, or VIX, has fallen to its lowest level in more than a week.

"The risks from North Korea have probably dissipated and Irma isn't quite as bad as the market had thought," said Alex Hill, head of dealing, Australasia, at HiFX. "We're back to watching the Fed again and it's a fairly reluctant Fed," he said, referring to dwindling bets the US Federal Reserve will hike rates for the third time this year.

The New Zealand dollar rose to 90.24 Australian cents from 89.97 cents. It traded as low as 89.66 Australian cents overnight and Hill said the kiwi-Aussie cross rate "has tested some pretty key support and bounced off that."

The kiwi hasn't fallen below 89.50 cents since March last year and Hill said it sold off too far, too quickly, in the face of more upbeat Australian economic data and softening interest rates expectations in New Zealand. He hasn't seen much notice taken of the election at the end of next week, which polls are showing will be a close-run race.

"It's a very good conversation point. The uncertainty does give the markets a reason to talk about the kiwi," he said. "But in reality what's going to change. We'll still have high interest rates, will still be a commodity exporter of well-regarded commodities and we'll still have housing market issues. A trend-change for the kiwi isn't going to happen."

The kiwi rose to 79.01 yen from 78.56 yen late yesterday. The kiwi dollar rose to 60.43 euro cents from 60.29 cents late yesterday after European Central Bank officials including board director Benoit Coeure flagged a gradual reduction in monetary stimulus from the bank. It traded at 4.7272 yuan from 4.7121 yuan yesterday and fell to 54.83 British pence from 54.98 pence.

The two-year swap rate fell 1 basis point to 2.14 percent while the 10-year swaps rose 1 basis point to 3.06 percent.

(BusinessDesk)

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