NZ dollar holds gain after Yellen's caution dials back rate hike expectations

Wednesday 30th March 2016

The New Zealand dollar held gains in local trading after a cautious speech by Federal Reserve chair Janet Yellen prompted investors to scale back their expectations for future interest rate increases in the US.

The kiwi traded at 68.44 US cents at 5pm in Wellington from 68.57 cents at 8am, up from 67.50 cents yesterday. The trade-weighted rose to 72.52 from 71.96 yesterday.

The greenback dropped after Yellen was more circumspect about the prospect of raising the federal funds rate than other Fed officials, saying it was appropriate for the central bank to "proceed cautiously" with an uncertain inflation outlook. With little local data scheduled this week, investors are largely watching US events for their cue with non-farm payrolls figures on Friday the next major piece of data.

"We're sitting here waiting to see if data continue to validate the normalisation of policy," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. "We've been marking time since Ms. Yellen completely put the kybosh on any plans to strengthen the US dollar."

Local data showed building consents bounced back in February, led by new permits in Auckland where a shortage of housing has pushed up property prices in recent years.

New Zealand's two-year swap rate fell six basis points to 2.2 percent at 5pm in Wellington, and 10-year swaps dropped 10 basis points to 2.99 percent.

The kiwi climbed to 89.72 Australian cents from 89.23 cents yesterday and advanced to 4.4380 Chinese yuan from 4.3922 yuan. It increased to 60.58 euro cents from 60.28 cents yesterday and gained to 47.60 British pence from 47.40 pence. The local currency rose to 76.99 yen from 76.62 yen yesterday.

BusinessDesk.co.nz

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