Dollar falls before RBNZ statement
Fed drops reference to global risks.
The New Zealand dollar fell as the Federal Reserve kept US interest rates unchanged and dropped a reference to global risks, suggesting it still intends to hike while the Reserve Bank is more inclined to cut borrowing costs.
The kiwi fell to 68.38USc as at 7:30am in Wellington, from 68.81USc late yesterday. The trade-weighted index fell to 72.41 from 72.67.
The Federal Open Market Committee kept the target range for its overnight lending rate at 0.25% to 0.5%, as expected, noting an improvement in the US labour market and saying it remained confident inflation would rise to its 2% target over the medium term.
It dropped a reference from its previous statement about global economic and financial risks but added it was closely monitoring offshore developments.
Locally, traders are now focused on the Reserve Bank's statement at 9am, with the market expecting the bank to keep the official cash rate at 2.25% now and cut in June.
"Overall, there were subtle changes here and there to the Fed's statement, but nothing really to change the policy outlook – the next move being data dependent," Bank of New Zealand currency strategist Jason Wong says.
In New Zealand, the market had been confused by recent Reserve Bank communications, he says. "The policy of a cut or on-hold decision could easily go either way" and market reaction was likely whatever the outcome. The BNZ is calling for a rate cut this morning.
The kiwi rose to 90.30Ac, having gained yesterday after weak Australian inflation revived talk of a rate cut across the Tasman, from 90.12Ac late yesterday.
The New Zealand dollar slipped to 47.07 British pence from 47.16 British pence and dropped to 60.48 euro cents from 60.83 euro cents. The local currency fell to 76.27 yen from 76.37 yen and slipped to 4.4399 yuan from 4.4628 yuan.
(BusinessDesk)
Jonathan Underhill
Thu, 28 Apr 2016
Thu, 28 Apr 2016
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Dollar falls before RBNZ statement
57668