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NZ dollar settles within a range on soothing developments

Monday 7th January 2019

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The New Zealand dollar is back to range-trading after a number of calming influences lifted it from last week’s lows.

The New Zealand dollar was trading at 67.50 US cents at 5pm in Wellington, just below the day’s high at 67.55 and from 67.40 cents at 9am this morning. The trade-weighted index eased to 73.29 points from 73.32.

Market strategist at Westpac, Imre Speizer, says recent calming influences included China’s easing of monetary policy, a move that freed up US$116 billion for new lending as it tried to combat a number of weaker economic indicators

Significantly better-than-expected United States jobs figures on Friday also helped. The economy added 312,000 jobs in December, significantly more than the 179,000 jobs economists had forecast and the November numbers were also revised upwards by 21,000 jobs.

Also smoothing last week’s jitters, US officials are meeting Chinese counterparts in Bejing this week. Investors are hopeful the two nations can strike a deal to end or at least limit the trade war begun by US President Donald Trump.

As well, Federal Reserve chair Jerome Powell both defended his political independence and reassured financial markets that the Fed will be “patient” about raising interest rates.

Trump has been complaining about the Fed raising interest rates, most recently in December, and had reportedly started exploring whether he has the right to fire Powell.

Powell said on Friday that he will not resign if Trump asks him to.

The latest slew of news was in sharp contrast to last week’s alarms, which included Apple Inc. reporting weak December quarter sales in China. That saw the New Zealand dollar fall as low as 65.88 US cents.

Speizer warns there could still be more volatility ahead, particularly if US stock markets continue their recent wild swings.

“It will take another couple of weeks before liquidity conditions will return to what you could call normal,” he says, adding that thin holiday trading could exacerbate any moves.

The New Zealand dollar fell to 94.56 Australian cents from 94.59 this morning but rose to 52.94 British pence from 52.91, and to 59.09 euro cents from 59.07. It fell to 72.97 yen from 73.10 and to 4.6211 Chinese yuan from 4.6231.

The New Zealand two-year swap rate ended the session at 1.9325 percent from 1.9450 on Friday; the 10-year rate rose to 2.6150 percent from 2.5800.


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