NZ dollar little changed below 71 US cents as greenback, US rates rise

Tuesday 15th November 2016

The New Zealand dollar was little changed, holding its ground against a greenback that's being driven up by rising US bond yields, amid expectations dairy prices will extend their gains at this week's auction.

The kiwi traded at 70.90 US cents as at 8am in Wellington, from 70.98 cents late yesterday. The trade-weighted index rose to 77.39 from 77.18.

The US dollar index rose to its highest level in about a year as US bond yields rose, with the yield on 10-year Treasuries reaching about 2.3 percent, the highest since early January. US bonds have tumbled, pushing yields higher, amid expectations a Donald Trump presidency will stoke the US economy and inflation. Meanwhile, in New Zealand, traders expect the central bank is done cutting interest rates and may look to hike toward to end of 2017.

"Markets remain in the grip of expectations President-elect Trump will boost spending and fund it by issuing debt," said Imre Speizer, senior market strategist at Westpac Banking Corp. "The US dollar has had an impressive rise since the US election and has potential to rise further, not least because the Fed will probably hike in December. Against that, the (NZ) economy is strong and dairy prices have risen."

Speizer says the kiwi may fall to 70 US cents in the next three months.

The kiwi sold off yesterday morning after the country was rocked by a magnitude 7.5 earthquake in the upper South Island. While the cost of damage repairs hasn't been quantified yet, the market doesn't believe it will dent the economy enough to warrant an emergency interest rate cut as the Reserve Bank did after the Christchurch quake in 2011. There have been some 800 aftershocks since the quake just after midnight on Monday morning.

The local currency rose to 76.91 yen from 76.22 yen yesterday and was little changed at 94.06 Australian cents from 94 cents. It traded at 4.8556 yuan from 4.8431 yuan.

The kiwi rose to 56.79 British pence from 56.50 pence and gained to 66.12 euro cents from 65.70 cents.

BusinessDesk.co.nz

Comments from our readers

No comments yet