NZ dollar falls as US Fed officials say June interest rate hike still possible
The kiwi fell to 67.63USc at 8am in Wellington from 67.94USc yesterday.
The New Zealand dollar fell as traders continued to see the possibility of US interest rates rising next month after Federal Reserve officials said the June meeting was still live for a move, stoking demand for the greenback.
The kiwi fell to 67.63USc at 8am in Wellington from 67.94USc yesterday. The trade-weighted index declined to 72.84 from 73.08 yesterday.
Traders are pricing in a 32% chance the Federal Open Market Committee will raise the federal funds rate when it meets next month, having priced in a 5% chance two weeks ago. Recent speeches by central bankers have supported that line, and St Louis Fed President James Bullard and San Francisco Fed boss John Williams held to that view in speeches overnight.
"The generally modest reaction to date in equity, credit and FX markets to higher US interest rate expectations should provide the FOMC with a modicum of comfort," ANZ Bank New Zealand economist Mark Smith and FX strategist Sam Tuck said in a note. "With Fed hikes looking more imminent, the case for further rate cuts by the Reserve Bank and other central banks worried about local currency strength looks more tenuous in the current environment."
New Zealand's Reserve Bank has indicated it has scope to cut the official cash rate as a strong currency continues to hold down inflation, though rising expectations for a US rate hike have prompted some forecasters to push out their timeframe, with Bank of New Zealand economists now predicting no change next month.
ANZ's Messrs Smith and Tuck expect the kiwi will trade between 66.80USc and 68.20USc today.
The local currency dropped to ¥73.85 from ¥74.65 yesterday as Japan's currency strengthened against the greenback after the country posted its biggest trade surplus in six years.
The kiwi was little changed at 93.61Ac from 93.67 cents yesterday and declined to 4.4294 Chinese yuan from 4.4474 yuan. It decreased to 60.29 euro cents from 60.49 cents yesterday and dipped 46.69 British pence from 46.79 pence.
(BusinessDesk)
Paul McBeth
Tue, 24 May 2016
Tue, 24 May 2016
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NZ dollar falls as US Fed officials say June interest rate hike still possible
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