The New Zealand dollar recovered some of its recent losses in the local trading session ahead of tomorrow's Reserve Bank monetary policy statement, which will likely see the official cash rate held at 2.5 percent.
The New Zealand dollar recovered some of its recent losses in the local trading session ahead of tomorrow’s Reserve Bank monetary policy statement, which will likely see the official cash rate held at 2.5 percent.
The kiwi rose to 81.59 US cents at 5pm from 81.19 cents at 8am and 81.44 cents yesterday. The trade-weighted index rose to 72.50 from 72.23.
The currency touched a six-week low in the lead-up to tomorrow’s interest rate review as investors’ nerves about the strength of the global recovery were renewed amid fears Greece won’t secure its bail-out package and China downgraded its growth outlook.
Reserve Bank Governor Alan Bollard is tipped to keep the OCR on hold, though analysts will be monitoring the track of forecast interest rates. Traders are starting to bet a rate hike is on the horizon, pricing in 24 basis points of increases over the coming 12 months, according to the Overnight Index Swap curve.
In the December MPS, the central bank reined in its forecast track for the 90-day bank bill, often seen as a proxy for the OCR, with gradual rises through the second half of the year.
“For New Zealand to raise rates, it’s going to depend on global factors” and we “probably looking at Q1 next year,” said Alex Hill, senior currency strategist at HiFX in Auckland. “The kiwi has finally broken out of the range and now we’ll see whether or not the risk-off move will continue. It does look like there’s a fairly aggressive move and further room on the downside.”
The New Zealand dollar gained against the Australian dollar after figures showed Australia’s economy grew at a pace of 0.4 percent in the final three months of last year, half the pace expected.
That follows a Reserve Bank of Australia meeting yesterday, where Governor Glenn Stevens kept the target cash rate on hold at 4.25 percent, and warned any material deterioration in its economy may lead to further rate cuts. Any RBA rate cut would narrow the gap with New Zealand's OCR, helping lift the kiwi dollar.
The New Zealand dollar rose to 77.34 Australian cents from 76.65 cents yesterday.
The Bank of Canada, Bank of England and European Central Bank also meet to review interest rates later this week.
The kiwi fell to 65.93 yen from 66.32 yen. It gained to 62.09 euro cents from 61.70 cents yesterday, and climbed to 51.87 pence from 51.38 pence.
