NZ dollar eased against the Aussie after IMF lifts 2018 growth forecast

Tuesday 9th October 2018

The New Zealand dollar eased against the Aussie after the International Monetary Fund lifted its 2018 economic growth forecast for Australia while lowering its global expectations.

The kiwi traded at 90.95 Australian cents at 5pm in Wellington from 91.13 Australian cents at 8am and from 91.23 cents yesterday. It traded at 64.44 US cents from 64.39 cents yesterday, with US markets closed for the Columbus Day holiday.

In the latest World Economic Outlook, the IMF forecast global economic growth would be 3.7 percent in 2018/19, a 0.2 percent reduction from its previous forecast in April. For Australia, it lifted its 2018 growth forecast by 0.2 percent to 3.2 percent.

Tim Kelleher, head of institutional foreign exchange sales at ASB Bank, said the Aussie fared better than the kiwi over the day and the IMF news "has given it a little fillip in the last hour."

Overall, he said currencies are being driven by the interest rate outlook in the US. That will make it hard for the kiwi to rally with Asian equities in a 'risk-off' mode

"The mighty dollar is dominant and that's all that is going on," he said.

"Unless we get a bit of reprieve bounce in the share market it's hard to see the currency bouncing back up."

According to Reuters, Asian shares hit a 17-month low today, largely as China allowed the yuan to slip further. The fact that the IMF lowered its global growth forecast won't have helped risk appetite.

The kiwi dollar overlooked news that the government's operating surplus beat expectations. The Crown's tax take was bolstered by rising company profits, a bigger working population and increased investment gains.

The June year core operating surplus beat Treasury's forecasts by $2.4 billion. However, "this was largely due to timing issues with Crown expenses, which will reverse out as that planned spending occurs early in the 2018/19 year," Finance Minister Grant Robertson said.

The kiwi rose to 4.4571 Chinese yuan from 4.4408 yuan yesterday. It fell to 72.88 yen from 73.31 yen. It was at 49.22 British pence from 49.11 pence and at 56.07 euro cents from 55.93 cents yesterday. The trade-weighted index was at 70.64 from 70.60 yesterday.

New Zealand's two-year rate was unchanged at 2.01 percent as were 10-year swaps at 2.93 percent.

(BusinessDesk)

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