NZ dollar holds above 72 US cents as OCR review looms

Thursday 11th August 2016

The New Zealand dollar was little changed, holding above 72 US cents ahead of the Reserve Bank monetary policy statement at 9am, as traders await details of governor Graeme Wheeler's easing schedule.

The kiwi traded at 72.14 US cents as at 8am in Wellington from 72.13 cents late yesterday. The trade-weighted index was at 76.25, well above the level the central bank projected for the third quarter, from 76.28.

The Reserve Bank last month signalled intentions to drop the official cash rate as a persistently high kiwi dollar made imports cheaper, making it more difficult for Wheeler to lift inflation into his target band of 1-to-3 percent. Traders have fully priced in a 25 basis point cut to the official cash rate to 2 percent today and the swaps market is indicating they see almost 70 basis points of cuts in the year ahead.

"If the RBNZ delivers a 25 basis point cut today but the market does not view its commentary as sufficiently dovish, the NZD/USD could experience a knee-jerk bounce," said Kymberly Martin, senior market strategist at bank of New Zealand. "Even if the RBNZ were to deliver a 50bps cut today (not our central view) we are doubtful it would have an enduring dampening effect on the NZD/USD. Rather, relative economic fundamentals, global risk appetite and evolving expectations for the US Fed will likely remain dominant drivers."

The kiwi was little changed at 93.61 Australian cents from 93.68 cents. It was little changed at 73.03 yen and slipped to 4.7848 yuan from 4.7919 yuan. It gained to 55.36 British pence from 55.18 pence and traded at 64.53 euro cents from 64.66 cents.

(BusinessDesk)

BusinessDesk.co.nz

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