NZ dollar little changed in short Easter week after dipping in wake of Brussels attacks

Wednesday 23rd March 2016

The New Zealand dollar was little changed after falling overnight after terrorist attacks in Brussels prompted an initial flight to so-called safe assets such as gold and the yen.

The local currency traded at 67.32 US cents at 5pm in Wellington, little changed from 67.38 cents at the start of the day and down from 67.68 cents late yesterday. The trade-weighted index fell to 71.46 from 71.85 yesterday.

While both the yen and the price of gold initially rose after the attacks, they gave up some of their gains over the course of the day. Traders said the kiwi dollar didn't move much after Fonterra Cooperative Group posted a jump in first-half profit, lifted its dividend and predicted a recovery in the price of whole milk powder this year, although whole milk powder futures actually fell today. The market will begin focussing on the Federal Reserve after officials this week said their April meeting remains "live" in terms of a possible interest rate hike, even though the central bank signalled last week that rates would not rise as much as previously projected.

"I hate to say it but there's a degree of desensitisation in the market to one-off shocks and bad news," said Mark Johnson, senior dealer at OMF. Looking ahead, "it looks like the US dollar is back in favour, having recovered from recent lows. The Fed's in a tightening cycle, albeit only one hike into it. New Zealand's in an easing cycle."

Johnson says the kiwi dollar is probably capped at 68.75 US cents this week and will find support at around 65.75 cents "and it looks like it wants to test the lower bounds".

The New Zealand dollar fell to 88.30 Australian cents from 89.15 cents yesterday, and to 4.3693 yuan from 4.3931 yuan. It gained to 47.36 British pence from 47.07 pence on concern Britain may be more likely to vote to leave the EU. The kiwi was little changed at 60.04 euro cents from 60.10 cents yesterday, and at 75.62 yen from 75.69 yen.

The two-year swap rate rose 3 basis points to 2.25 percent and 10-year swaps rose 6 basis points to 3.09 percent.

(BusinessDesk)

BusinessDesk.co.nz

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