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NZ dollar little changed in slow start to event-filled week

Monday 14th March 2016

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The New Zealand dollar was little changed in a slow start to a week where investors will have to gauge US monetary policy, local economic growth and the latest dairy price auction. 

The kiwi traded at 67.49 US cents at 5pm in Wellington from 67.16 cents at 8am and 67.50 cents on Friday in New York. The trade-weighted index gained to 71.95 from 71.51 last week. 

A BusinessDesk survey of 12 analysts expects the local currency will trade between 65 US cents and 69 cents this week, with six predicting it will fall, five expecting little movement, and just one betting it will gain. The US Federal Reserve reviews monetary policy this week and investors will be watching to see whether policy makers will stick to their planned interest rate hiking cycle given the string of upbeat American data.

At the same time, the kiwi faces local event risk from an off-the-record speech by Reserve Bank governor Graeme Wheeler tomorrow, a GlobalDairyTrade auction on Tuesday in the US, and fourth-quarter gross domestic product on Thursday. 

"The kiwi is becalmed today with a lack of data, but there's plenty in the week ahead," said Stuart Ive, senior dealer foreign exchange at OMF in Wellington. "Even if our data starts coming in weak we could still find ourselves wedged in this 64 to 69 cents range." 

The Reserve Bank cut the official cash rate a quarter-point to 2.25 percent last week as cheap global oil feeds through to softer inflation expectations. Still, New Zealand's benchmark rate is in positive territory, and OMF's Ive said that continues to provide yield to investors. 

"The kiwi as an investment vehicle is still relatively attractive and that remains the single biggest issue that's stopping the kiwi coming back from its current level," Ive said. 

New Zealand's two-year swap rate increased one basis point to 2.27 percent at 5pm in Wellington, and 10-year swaps were up four basis points to 3.07 percent. 

The BNZ-BusinessNZ performance of services index today showed activity in the country's dominant sector expanded at a faster pace last month, as a better employment outlook made up for a deteriorating jobs picture in its sister manufacturing survey last week. 

The local currency slipped to 88.95 Australian cents from 89.10 cents last week, and increased to 4.3823 Chinese yuan from 4.3757 yuan after official Chinese industrial production data on the weekend was softer than expected. 

The kiwi gained to 76.83 yen from 76.68 yen last week ahead of the Bank of Japan's policy review tomorrow, which is likely to sustain its stimulus package of quantitative easing and negative interest rates. 

The local currency was little changed at 60.47 euro cents from 60.41 cents on Friday in New York, and traded at 46.92 British pence from 46.87 pence.

BusinessDesk.co.nz



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