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Fed's wait-and-see signal keeps NZ dollar steady for the week

Friday 7th December 2018

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The New Zealand dollar is steady on the week after ongoing worries about the China-US trade stoush were offset by news reports that the US Federal Reserve may signal a wait-and-see approach regarding rate hikes in 2019.

The kiwi traded at 68.83 US cents versus 68.71 US cents at 8am in Wellington and 68.62 cents yesterday.  It was at 68.78 cents last Friday in New York. The trade-weighted index was at 74.99 from 74.87 yesterday.

The kiwi remained under pressure after the arrest of Huawei Technologies' chief financial officer Wanzhou Meng in Canada for extradition to the United States reignited fears over the US-China relationship.  

However, any fall was tempered after a Wall Street Journal report that said Federal Reserve officials are considering whether to signal a new wait-and-see approach after a likely interest-rate increase at their meeting in December, said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. 

According to the report, as officials push up their benchmark, they are becoming less sure how fast they will need to act or how far they will need to go.

While any trade-related headlines are likely to push currencies around, Kelleher said tonight's US jobs data will be closely watched. Domestically the next key piece of data is the gross domestic product on Dec. 20. 

The kiwi traded at 95.15 Australian cents from 95.04 cents yesterday. Jason Wong, senior markets strategist for BNZ, said he now thinks the kiwi will hold up against the Aussie for longer.  "Our updated forecasts have 0.95-0.96 being the new mid-point of a trading range that might well now be 0.93-0.98 through to the middle of next year."

While the Australian economy outperformed NZ earlier in the year, "that dynamic appears to have switched over in the second half", he said.  

Another clear difference is the housing market, he said. Corelogic figures for Australia is showing house prices across the state capitals are down 5.5 percent year on year, with larger falls for Sydney and Melbourne, said Wong. NZ data shows house prices are holding up.

The kiwi traded at 77.68 yen from 77.35 yen and increased to 4.7291 Chinese yuan from 4.7215 yuan. It was at 60.51 euro cents from 60.51 cents yesterday and fell to 53.89 British pence from 53.93 pence.

New Zealand's two-year swap rate was unchanged at 2.04 percent; the 10-year swaps eased 2 basis point to 2.77 percent.

(BusinessDesk)

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