NZ dollar little changed as closed markets in US, UK keep traders eyeing Fed

he New Zealand dollar was little changed as investors questioned whether the Federal Reserve will hike interest rates next month, with holidays in the US and the UK keeping a lid on trading volumes.

The kiwi traded at 66.91USc at 8am in Wellington from 66.84USc yesterday. The trade-weighted index was unchanged at 72.35.

US markets were closed for the Memorial Day holiday and the UK was closed for a Spring bank holiday, leaving trading relatively quiet. Traders continued to focus on the Fed's meeting next month after chairwoman Janet Yellen told an audience on Friday that the next decision was "live." That prompted traders to price in a 36% chance of an increase at the next meeting, up from less than 5% in the middle of May, something St Louis Fed president James Bullard yesterday said wasn't surprising given the central bank's goal of trying to gradually normalise rates over time.

"The US dollar is firmer than before Mrs Yellen's comments, European and Asian equity values have continued to advance and the government bond market has not yet spat the dummy, although this will be tested when the US rates market reopens tonight. None of this provides warning signs yet for the Fed," ANZ Bank New Zealand economist Mark Smith and FX strategist Sam Tuck said in a note. "ANZ business confidence today will be a key read for the kiwi, but the kiwi will still mostly be driven by US data flow which begins to pick up tonight, with US consumer confidence, personal income/spending, and the Chicago PM."

Messrs Smith and Tuck predict the kiwi will trade between 66.60-67.60USc today.

Government figures on April building consents and the ANZ Business Outlook survey are scheduled for release today.

The local currency fell to 93.04Ac from 93.34Ac yesterday ahead of Australian first-quarter gross domestic product data tomorrow, and the kiwi slipped to 60.04 euro cents from 60.20 cents yesterday after German inflation and EU confidence came in just ahead of expectations.

The New Zealand dollar gained to ¥74.33 from ¥73.84 yesterday and increased to 4.4027 Chinese yuan from 4.3991 yuan. It was little changed at 45.70 British pence from 45.73 pence yesterday.

(BusinessDesk)