NZ dollar ends week down 1.7% as all eyes on Fed

The New Zealand dollar remained out of favour on Friday, falling 1.7 percent on the week against the greenback as markets gear up for a rate increase from the U.S. Federal Reserve.

The kiwi dollar was trading at 69.10USc at 5pm versus 69c cents late Thursday and 70.30 early on Monday. It also eased 1.3 percent on a trade-weighed index basis over the week and was trading at 75.94.

"The kiwi has held about that 68.90USc level, helped by some exporter buying," said Tim Kelleher, head of institutional foreign exchange sales for ASB Bank. Domestic data was largely overlooked, with markets waiting for US jobs data later in the global trading day with investors expecting an addition of 200,000 non-farm payrolls. If that data is as expected or better and the Federal Reserve is "reasonably hawkish" at its rate review next week, the kiwi might fall further. However, given that the market is widely expecting a Fed rate increase next week and at least two more hikes this year, the kiwi is unlikely to plunge.

Mr Kelleher noted the kiwi has traded in a 68.50USc to 73.50USc range for the past six months and said it is unlikely to break out of it just yet.

Mr Kelleher underscored the only story right now is the US dollar story. Even the euro failed to really fire after ECB president Mario Draghi said further measures to support the Eurozone's economic recovery and boost inflation are becoming less likely. "I was surprised it didn't spike higher on that but it's all US dollar dominated right now," Mr Kelleher said.

The kiwi was trading at 91.91Ac against 91.86Ac and at 4.7740 Chinese yuan from 4.7758 yuan yesterday. It was at 56.81 British pence from 56.75 pence yesterday and was at 79.58 yen versus 79.02 yen.

The two-year swap rate was unchanged at 2.31% and 10-year swaps rose four basis points to 3.60%.

(BusinessDesk)

Rebecca Howard
Fri, 10 Mar 2017

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NZ dollar ends week down 1.7% as all eyes on Fed