Dollar little changed after RBNZ stands pat, markets await vote to repeal Obamacare

If a planned vote by the House on Thursday fails it could weaken the US dollar and equity markets.

The New Zealand dollar was little changed, retreating from an earlier gain after the central bank reiterated rates will be on hold for the foreseeable future and as markets await the outcome of a US vote to repeal Affordable Care Act, also known as Obamacare.

The kiwi fell to 70.39 US cents as at 5pm in Wellington versus 70.50 cents as at 8am in Wellington and from 70.30 cents late yesterday. The trade-weighted index was at 76.33 from 76.25.

The central bank kept the official cash rate unchanged at 1.75 percent, as expected, today. ANZ Bank New Zealand senior economist Philip Borkin said the statement may have weighed on the kiwi as the market was possibly looking for "something more" about the fact that inflation was going to get back to 2 percent shortly, the mid-point of the central bank's target range. "They might have been expecting them to shift that bias slightly, he said. Instead, Reserve Bank governor Graeme Wheeler reiterated that "monetary policy will remain accommodative for a considerable period."

The kiwi "just unwound a little bit," said Borkin. There is also "plenty going on in the US at the moment. Markets are moving on headlines about the possible repeal of the Affordable Care Act" as "people are looking at that as a watershed as to whether Trump will be able to get many of his other policies in play" he said.

If a planned vote by the House on Thursday fails it could weaken the US dollar and equity markets, said Borkin. "Markets are coming to the realisation that what Trump has promised may be more difficult in reality than was thought," he said.

The kiwi dollar rose to 56.40 British pence from 56.36 pence late yesterday. Markets were jittery after a suspected terrorist injured dozens of pedestrians in London before crashing his car near the gates of Parliament and a policeman was stabbed. Four people were killed in the attack.

The New Zealand dollar traded at 91.91 Australian cents from 91.85 cents, fell to 78.37 yen from 78.48 yen and rose to 4.8482 yuan from 4.8394 yuan. It rose to 65.25 euro cents from 65.11 cents.

The two-year swap rate rose 1 basis point to 2.29 while the 10-year swaps were unchanged at 3.41 percent.

(BusinessDesk)