Kiwi little changed before stability report that may signal end to LVRs

The Reserve Bank is expected to reiterate that the financial system is in good shape.

The New Zealand dollar was little changed, holding above 69 US cents for the second day, ahead of the Reserve Bank's financial stability report, which may signal an end to measures aimed at cooling the property market.

The kiwi traded at 69.18 US cents as at 8am in Wellington from 69.26 cents late yesterday. The trade-weighted index slipped to 72.94 from 73.03 yesterday.

The Reserve Bank is expected to reiterate that the financial system is in good shape but is likely to repeat that housing remains a risk and that it is keeping an eye on commodity prices, especially dairy. But it may also include some commentary on the effectiveness of macroprudential tools such as loan-to-value ratio restrictions, given there are signs that heat is coming out of the property market and it has previously flagged that market as a risk to financial stability.

"The financial system should again be judged as 'sound', but not without risk around housing, bank funding, dairy and a global event," said Con Williams, rural economist at ANZ Bank New Zealand, in a note. "There will be a focus on the lifespan of LVR restrictions. While we do not believe the RBNZ will be ready to remove or even lessen the restrictions in the short term, it is possible that it lays out a (conditional) plan or timeline for when they could be reduced in the future."

The report is released at 9am, with a media briefing at 11am and an appearance by Reserve Bank officials before the finance and expenditure select committee. Also out this morning is an announcement from the government on changes to the brief for the Overseas Investment Office, which may include a register of foreign buyers and restrictions on their activities.

The greenback strengthened overnight after the Conference Board index of consumer confidence rose to a 17-year high and as Federal Reserve governor Jerome Powell, in position to be the next Fed chair, was questioned by a Senate committee.

The kiwi dollar fell to 90.92 Australian cents from 91.08 cents yesterday. The kiwi rose to 58.34 euro cents from 58.18 cents and fell to 51.80 British pence from 51.97 pence. It fell to 4.5689 yuan from 4.5743 yuan and slipped to 76.94 yen from 77.02 yen.

(BusinessDesk)

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