NZ dollar little changed as traders weigh weak Chinese trade, US jobs data

Monday 10th August 2015

The New Zealand dollar was little changed as traders weighed up the impact of weaker Chinese trade figures on the Australasian economies and whether US jobs growth was strong enough to warrant an interest rate hike by the Federal Reserve next month.

The kiwi traded at 66.09 US cents at 5pm in Wellington from 66.03 cents at 8am and 66.16 cents on Friday in New York. The trade-weighted index rose to 70.44 from 70.05 last week.

Stocks across Asia were mixed as investors evaluate a bigger decline than expected in Chinese exports, while US non-farm payrolls were just short of forecasts with an extra 215,000 jobs added in the world's biggest economy. On one hand, traders are trying to determine the impact a slowing Chinese economy will have on the Asia Pacific, while on the other, upbeat US data continues to support the prospect for a rate hike by the Fed when it next meets in September.

"We still believe the Fed's on track to raise rates in September, and this thing is a very short-term corrective move in the US dollar," said Martin Rudings, senior dealer foreign exchange at OMF in Wellington. "Anything contrary to the US dollar strength is a short-term proposal at best."

OMF's Rudings said milk powder futures had gained today, which might be helping support the kiwi dollar after Fonterra Cooperative Group slashed its forecast payout to farmers on Friday to $3.85 per kilogram of milk solids.

A BusinessDesk survey of 11 currency advisers predicts the kiwi will trade between 64.80 US cents and 67.70 cents this week. Seven expect the currency to gain, while four say it will be little changed. None expect it to decline.

The kiwi dollar slipped to 4.1033 Chinese yuan from 4.1077 yuan on Friday in New York, and gained to 89.29 Australian cents from 89.15 cents.

OMF's Rudings said the kiwi/Aussie cross-rate was in a "reasonably good selling" position, with New Zealand's Reserve Bank expected to lower interest rates further to support a slowing economy, while Australia's central bank is seen as staying on hold.

New Zealand's two-year swap rate was unchanged at 2.88 percent from last Friday, and the 10-year swap slipped to 3.64 percent from 3.68 percent.

The kiwi traded at 62.24 euro cents from 60.30 cents last week, and was little changed at 42.67 British pence from 42.69 pence. The kiwi traded at 82.20 yen from 82.18 yen on Friday.

BusinessDesk.co.nz

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