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NZ dollar range-bound as greenback strength continues into new year

Wednesday 4th January 2017

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The New Zealand dollar edged lower, remaining in recent ranges, as the greenback's ascendancy stays intact with the prospect of large US infrastructure spending and a strong economy continue to support the expectation for higher US interest rates. 

The kiwi slipped to 69.21 US cents as at 8am in Wellington from 69.46 cents yesterday, and 69.33 cents on Friday in New York. The trade-weighted index dipped to 77.39 from 77.52 last week. 

The US dollar index, a measure of the greenback against a basket of currencies, remained near 14-year highs in thinly traded markets in the opening to 2017 as the latest US data pointed to a healthy US economy. With US president-elect Donald Trump promising tax reform and infrastructure spending, the US Federal Reserve has indicated a more aggressive track of rate hikes in the year ahead, lifting yields on bonds and stoking demand for the greenback. 

"The US dollar is still in its uptrend, and as long as that remains so, the kiwi will be range-bound or lower," said Imre Speizer, senior markets strategist at Westpac Banking Corp in Auckland. "The year ahead does look pretty good for the US dollar."

Westpac's Speizer said the kiwi has been stuck in a range of 68.60 US cents and 69.90 cents for the past three weeks. 

Prices fell at the latest GlobalDairyTrade auction, with New Zealand's key export product - whole milk powder - falling 7.7 percent to US$3,294 a tonne. Fonterra Cooperative Group boosted supply at the event, though the decline was bigger than what New Zealand's futures market priced in before trading closed for the New Year holiday. 

The local currency fell to 95.79 Australian cents from 96.23 cents yesterday and declined to 81.45 yen from 81.63 yen. It was little changed at 66.56 euro cents from 66.42 cents yesterday and almost unchanged at 56.55 British pence from 56.56 pence. The local currency fell to 4.8167 Chinese yuan from 4.8377 yuan yesterday. 

 

BusinessDesk.co.nz

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