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NZ dollar rises but seen as range-bound ahead of election, Fed statement

Tuesday 19th September 2017

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The New Zealand dollar gained although it remains in a tight range as investors await the Federal Reserve meeting for clues on US monetary policy as well as the final opinion polls ahead of Saturday's election.

The kiwi was trading at 72.78 US cents as at 5pm in Wellington from 72.57 cents at the start of the day and from 73.12 cents late yesterday. The trade-weighted index fell to 75.97 from 76.08 yesterday. 

The New Zealand dollar got a slight lift against the greenback ahead of the Federal Reserves' two-day meeting beginning later in the global trading day. While the Fed is expected to take another step toward policy normalization and announce plans to begin unwinding its US$4.5 trillion balance sheet,  investors remain cautious, which is capping the US dollar. Domestically the focus is on Saturday's election with the final opinion polls due at any point. 

"It's been very quiet. I think everyone is waiting for that next event," said ANZ senior economist Phil Borkin. "It's building up to the FOMC and the election." The opinion polls will get "plenty of attention" but the bottom line is the election is too close to call, he said. 

The kiwi edged up against the Australian dollar after the Reserve Bank of Australia minutes but "they didn't really shake things up too much. We are a bit stronger, but only marginally so." He said the market had viewed the RBA as slightly more hawkish and "the hawkishness didn't really come through strongly in the minutes."

The kiwi dollar traded at 91.25 Australian cents from 91.10 cents yesterday.

Looking ahead he said tomorrow's balance of payments data is unlikely to move the market but the gross domestic product figures on Thursday will be more closely watched. However, even if it is a surprise and the market reacts it will "move on pretty quickly. The election is a much bigger focus right now as it could have a much greater bearing on the economy over the next couple of quarters," he said. 

It traded at 53.76 British pence from 53.80 pence and at 60.77 euro cents from 61.23 cents. It was at 81.24 yen from 81.27 yen and at 4.7954 yuan from 4.7872 yuan.

The two-year swap rate rose 2 basis point to 2.24 percent while 10-year swaps rose 2 basis points to 3.25 percent.

(BusinessDesk)



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