NZ dollar falls ahead of RBNZ rate decision

Wednesday 8th February 2017

The New Zealand dollar fell ahead of the central bank's interest rate decision tomorrow and as the US dollar gained some traction in Asia.

The kiwi fell to 73.04 US cents as at 5 pm versus 73.38 cents yesterday. The trade-weighted index declined to 79.52 from 80.

While the greenback gained when Federal Reserve Philadelphia president Patrick Harker talked up the chances for an interest rate hike next month "there wasn't any news of substance overnight to move markets and the day ahead of the Reserve Bank (rate decision) you would expect the kiwi would be quiet," said Westpac Banking Corp senior FX strategist Imre Speizer.

New Zealand's central bank is widely expected to keep rates on hold Thursday but the statement and forecasts will be closely scrutinized for any hints about when it might move to lift interest rates. In November, it cut rates by 25 basis points to 1.75 percent and forecast they would remain at that level until the end of 2019. Economists are expecting the first rate hike to come in 2018 although they say there is a risk it could be earlier.

Speizer said he expects the interest rate track to remain largely unchanged Thursday, although there is a small risk they push the track up at the long end "indicating the next move is a hike." If they do that "we'll be off to the races" and the kiwi could lift by a cent.

He said a sparse global calendar overnight will mean kiwi dollar investors remain focused on the RBNZ.

The kiwi traded at 95.64 Australian cents from 95.93 cents yesterday.

The local currency fell to 58.40 British pence from 59.02 pence yesterday and to 68.35 euro cents from 68.72 cents yesterday. It slipped to 81.87 yen from 82.33 yen yesterday and declined to 5.0262 Chinese yuan from 5.0586 yuan.

New Zealand's two-year swap rate fell 2 basis point to 2.35 percent while the 10-year swaps fell 1 basis point to 3.46 percent.

BusinessDesk.co.nz

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