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NZ dollar heading for 1.5% weekly decline; eyes on Jackson Hole

Friday 25th August 2017

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The New Zealand dollar was headed for a weekly drop of 1.5 percent after weaker forecasts for economic growth and budget surpluses from Treasury and ahead of headlines out of the central banker's symposium in Jackson Hole. 

The kiwi was at 72.03 US cents as at 5pm in Wellington versus 72.08 US cents as at 8am in Wellington and from 72.23 cents late yesterday.  It was at 73.12 cents late last Friday in New York. The trade-weighted index fell to 75.86  from 76.04 yesterday.

Federal Reserve Chair Janet Yellen is slated to speak Friday in the US followed Mario Draghi, president of the European Central Bank later in the day.  According to Reuters, Yellen and Draghi are scheduled to speak at 1400 and 1900 GMT respectively. Yellen's speech will be closely scrutinized for any hints on when the Federal Reserve may begin balance sheet reduction while Draghi could comment on the euro's recent strength. 

"That's all that's going on," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. He said there could be some sharp moves given that it will essentially be Friday afternoon in the US and liquidity could be very thin. 'You don't really want to be running a great deal of risk into that," he said, adding that increased dollar strength is the biggest risk given how the market is currently positioned. 

BNZ head of research Stephen Toplis said he still believes the New Zealand dollar will weaken through the end of the year as the Fed delivers on its tightening cycle and US indicators improve. However, "positive relative economic and commodity performance should deliver some NZD appreciation against the AUD," he said. 

The New Zealand dollar was at  91.20 Australian cents from 91.41 cents yesterday. It eased to 61.07 euro cents from 61.19 cents and fell to 56.24 British pence from 56.48 pence. The kiwi dropped to 4.8007 yuan from 4.8124 yuan and was at 78.95 yen from 78.82 yen.

New Zealand's two-year swap rate was unchanged at 2.17 percent while 10-year swaps fell 1 basis point to 3.12 percent. 


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