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NZ dollar falls vs. British pound as stronger UK manufacturing sector stokes rate hike speculation

Tuesday 3rd November 2015

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The New Zealand dollar fell against the British pound after a report showed UK manufacturing activity unexpectedly surged last month, stoking speculation about future interest rate hikes.

The kiwi slipped to 43.63 British pence at 8am in Wellington, from 43.93 pence at 5pm yesterday. The local currency weakened to 67.29 US cents from 67.81 cents yesterday.

The British pound jumped higher after the UK purchasing managers' index for the manufacturing sector rose to 55.5 in October, its highest level in 16 months and ahead of the 51.3 expected and 51.8 reading in September. The survey showed new export orders picked up, while employment remained in expansion for the 30th successive month. The report adds weight to speculation the Bank of England will tighten monetary policy, although most economists believe it is unlikely to do so at this week's policy review.

"It's looking increasingly likely that the BoE will have to consider a rate hike sooner rather than later," Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York, said in a note. "Still the central bank is likely to tread lightly and is certainly unlikely to announce anything new at the meeting this Thursday. Several analysts have pointed out that should BoE turn unambiguously hawkish, it could 'light a rocket' underneath the pound and send the currency soaring damaging the prospects for further export growth."

Schlossberg said the BoE is expected to wait for the Federal Reserve to tighten its monetary policy first.

In New Zealand today, Quotable Value is due to release its latest data on October residential property values at midday, ANZ Bank publishes its monthly commodity price index at 1pm and monthly vehicle registration data is also expected to be released.

Tonight, the focus will be on the fortnightly GlobalDairyTrade auction with NZX futures pricing pointing to a decline.

The New Zealand dollar fell to 94.27 Australian cents from 94.92 cents yesterday ahead of the Reserve Bank of Australia decision on interest rates today. Traders are betting there is about a 40 percent chance the RBA will cut rates today. The decision is published at 4:30pm New Zealand time.

The local currency slipped to 61.02 euro cents from 61.46 cents yesterday after comments from European Central Bank officials lowered expectations it would increase its bond-buying stimulus programme next month.

The kiwi declined to 81.23 yen from 81.56 yen yesterday, and fell to 4.2642 yuan from 4.2965 yuan. The trade-weighted index dropped to 72.77 from 73.25 yesterday.

 

 

 

 

BusinessDesk.co.nz



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