NZ dollar heads for 0.4% rise this week as traders weigh up interest rate outlook

Friday 13th November 2015

The New Zealand dollar is heading for a 0.4 percent gain this week as traders weigh up the prospect of lower domestic interest rates against the growing likelihood of higher rates in the US.

The kiwi traded at 65.42 US cents at 5pm in Wellington from 65.18 cents on Friday in New York last week. It traded at 65.27 cents at 8am, and was little changed from 65.57 yesterday. The trade-weighted index was at 71.26 from 71.35 yesterday, and is heading for a 0.5 percent decline this week after strong jobs data across the Tasman pushed the kiwi down against its Australian counterpart.

A BusinessDesk survey of 10 currency analysts predicted the kiwi would trade between 62.85 US cents and 67.50 cents this week. Eight expected the kiwi to fall, two said it would stay relatively unchanged while no-one picked a rise.

Investors are waiting on US retail sales and a consumer confidence survey after stronger than expected employment figures last week stoked expectations the Federal Reserve will end its seven-year old policy of near-zero interest rates. At the same time, New Zealand's central bank has a bias towards cutting interest rates lower, and falling milk powder futures prices is seen as increasing the likelihood for lower domestic rates.

"There's big US data, and if it comes out as expected or better, I can see the US dollar have another surge at the end of the week," said Stuart Ive, senior dealer foreign exchange at OMF in Wellington. "The kiwi looks a little bit land-locked between 65 (US cents) and 65.80, but I expect it's more likely to test the lower end than the upper end of the ranges at the moment."

OMF's Ive said the milk futures pricing was also weighing on the kiwi/Aussie cross-rate after strong jobs data yesterday bolstered demand for Australia's currency, and sapped expectations the Reserve Bank of Australia will cut interest rates again. The kiwi was little changed at 91.68 Australian cents at 5pm in Wellington from 91.72 cents yesterday, and is heading for a 0.8 percent weekly decline.

The kiwi declined to 4.1688 Chinese yuan from 4.1734 yuan yesterday, and fell to 80.17 yen from 80.58 yen. It decreased to 61.61 euro cents from 60.92 cents yesterday, and was little changed at 43 British pence from 43.06 pence.

New Zealand's two-year swap rate fell two basis points to 2.77 percent at 5pm in Wellington, and the 10-year swap rose one basis point to 3.66 percent.

BusinessDesk.co.nz

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