Dollar holds above 70USc ahead of RBNZ interest rate decision

The New Zealand dollar held above 70USc ahead of the Reserve Bank interest rate decision today, where the benchmark is expected to remain on hold.

The kiwi touched a month high of 70.27USc early this morning and was trading at 70.13USc at 8am in Wellington, from 70.02USc at 5pm yesterday.

The trade-weighted index edged up to 74.46 from 74.39 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, touched a month low of 93.425 early this morning as traders pull back their bets for an imminent US interest rate hike following last week's disappointing US labour market data.

Locally, the kiwi is being bolstered by improved commodity prices overnight and expectations the Reserve Bank governor Graeme Wheeler will refrain from cutting interest rates until later in the year, underpinning demand for the currency.

"There's been little news over the past 24 hours but a key theme is the lower-for-longer global interest rate environment and soft US dollar driving up commodity prices," Bank of New Zealand currency strategist Jason Wong says.

"In this context, it's no surprise the NZ dollar has broken through the 0.70 mark. While there is technical resistance at 0.7055 for the NZ dollar, that won't count for much as the focus turns to the RBNZ's statement this morning.

“The bank will have to pull a rabbit out of a hat to prevent a further push higher, although we wouldn't be chasing the currency higher from here, following the decent bounce over the past week and a bit," Mr Wong says.

The trade-weighted index touched 74.54 this morning, the highest level this year and ahead of the Reserve Bank's expectation for the TWI to average 70.9 in the second quarter.

"The governor will no doubt be champing at the bit to talk the currency lower," says Mr Wong.

The New Zealand dollar was little changed at 93.78Ac from 93.80Ac, at 61.54euro c from 61.56euro  c, and at 4.6005 yuan from 4.6004 yuan

It gained to 48.35 British pence from 48.11 pence, and to 75.06 yen from 74.91 yen.

(BusinessDesk)