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NZ dollar still under pressure ahead of Federal Reserve statement

Wednesday 2nd May 2018

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The New Zealand dollar remained under pressure against the greenback as investors await the US Federal Reserve’s policy statement for any clues about future rate hikes.


The kiwi dollar traded at 70.12 US cents as at 5pm in Wellington from 69.96 US cents as at 8am in Wellington from 70.35 cents late yesterday. The trade-weighted index was at 73.25 versus 73.20 late yesterday.


The US Federal Reserve, which is currently holding a two-day meeting, is widely seen holding interest rates steady early Thursday's New Zealand time but may add to the view that it will lift rates in June, which will fuel further interest in the greenback. 


"We have been calling the US dollar and it's hard to see it not continuing," Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.  He said the greenback is also getting support after positive corporate earnings from company's like Apple Inc , which reported resilient iPhone sales in the face of waning global demand and promised $100 billion in additional stock buybacks.


"It all adds up to US dollar dips being bought and the currency (NZD) going lower,"  he said. Kelleher said the kiwi has strong support around 68.00 US cents to 68.50 US cents.


The kiwi did get a slight reprieve when investors were cheered when a private gauge indicated China's factories expanded at a slightly faster rate in April. The Caixin China manufacturing purchasing managers' index edged up to 51.1 in April from 51.0 in March, Caixin Media Co. and research firm Markit said Wednesday, according to Dow Jones Newswires. 


Looking ahead, Kelleher said investors will switch their focus to next weeks central bank monetary policy review, Adrian Orr's first as central bank governor, followed by the budget the following week.  


The New Zealand dollar rose to 93.42 Australian cents from 93.27 cents yesterday and traded at 58.42 euro cents from 58.26 cents and rose to 51.52 British pence from 51.14 pence. It was at 76.95 yen, unchanged from yesterday,  and was at 4.4593 yuan from 4.4549 yuan.


New Zealand's two-year swap rate was unchanged at 2.27 percent and 10-year swaps rose 4 basis points to 3.21 percent.



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