NZ dollar heads for 3.3 percent weekly fall as central banks talk, emerging markets slide
The New Zealand dollar is heading for a 3.3 percent weekly fall after the Reserve Bank announced restrictions on low equity home loans, and central banks in Australia and the US kept investors dark on the trans-Tasman currencies.
The kiwi traded at 78.30 US cents at 5pm in Wellington from 78.29 cents at 8am and 78.38 cents yesterday, having started the week at 80.97 cents. The trade-weighted index was 73.99 at 5pm from 74.05 yesterday, and is heading for a 2.6 percent weekly decline from 75.96 at the Monday open.
New Zealand's Reserve Bank governor Graeme Wheeler on Tuesday announced lenders will have to cut back on their level of home lending with small deposits, allowing him to keep interest rates lower for longer, and dimming the appeal of the local currency. The same day minutes to the Reserve Bank of Australia's August policy meeting indicated a further rate cut was possible if needed, and minutes to the Federal Reserve's latest rate review firmed up expectations the US central bank will start slowing its bond buying programme.
A BusinessDesk survey of 10 traders and strategists on Monday predicted the local currency would trade between 79.25 US cents and 82.25 cents this week, with seven picking a gain, two forecasting a decline and one saying it would remain unchanged.
"I don't think anyone on Monday, when the kiwi was threatening the top-side, would have expected the currency near 78.50 US cents on Friday," said Mike Jones, currency strategist at Bank of New Zealand. "The selling pressure has let up over the past couple of days."
The Australasian currencies also came under pressure after global investors dumped assets in emerging markets, amid fears developing economies were slowing down. That prompted the Reserve Bank of India to embark on a bond-buying programme and a state-owned pension fund in Indonesia to accumulate beat up shares on the Jakarta stock exchange.
The central bankers' symposium at Jackson Hole, Wyoming may attract some attention this weekend, despite the absence of Fed chairman Ben Bernanke, European Central Bank president Mario Draghi and Bank of England governor Mark Carney.
The New Zealand dollar fell to 86.78 Australian cents at 5pm in Wellington from 87.14 cents yesterday and gained to 77.54 yen from 77.02 yen. The kiwi decreased to 58.66 euro cents from 58.77 cents yesterday and almost unchanged at 50.23 British pence from 50.24 pence yesterday.