NZ dollar little changed through Christmas as greenback still in favour

Wednesday 28th December 2016

The New Zealand dollar was little changed through the Christmas holiday period as investors continued to rally behind the greenback on the expectation of rising US interest rates.

The kiwi traded at 68.85 US cents as at 8am in Wellington from 68.79 cents yesterday, and 68.77 cents on Friday in New York. The trade-weighted index edged down to 76.98 from 77.09 last week.

The US dollar index has remained near 14-year highs, with investors optimistic US president-elect Donald Trump's infrastructure spending and tax plans will reinvigorate the world's biggest economy, and encourage the Federal Reserve to raise interest rates more aggressively. Stocks on Wall Street gained, with the tech-heavy Nasdaq Composite Index reaching a new record.

"On a technical basis, everything is moving sideways," said Martin Rudings, senior foreign exchange dealer at OMF in Wellington. "The trend still remains intact and we're looking at a strong US dollar, so the kiwi should succumb to that."

The kiwi traded at 4.7852 Chinese yuan from 4.7767 yuan yesterday after China's state-owned media agency Xinhua reported the world's second-biggest economy will meet its growth target of 6.5-to-7 percent this year and will target a rate of 6.5 percent in 2017.

OMF's Rudings said that lower target for 2017 could weigh on Australia more than New Zealand, with both nations relying on China as their largest trading partner.

"New Zealand is in a slightly better place than Australia, and I can see the kiwi/Aussie cross rallying up towards 98 cents," he said. The local currency was little changed at 95.81 Australian cents from 95.85 cents yesterday.

The kiwi traded at 65.85 euro cents from 65.91 cents yesterday, and was little changed at 56.09 British pence from 56.07 pence. The local currency traded at 80.88 yen from 80.76 yen yesterday.

New Zealand's two-year swap rate slipped one basis point to 2.48 percent from the Friday close, while 10-year swaps were down one basis point to 3.55 percent.

(BusinessDesk)

BusinessDesk.co.nz

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