NZ dollar poised for 0.5% monthly gain as RBA rate cut looms

NZ dollar poised for 0.5% monthly gain as RBA rate cut looms

By Paul McBeth

April 30 (BusinessDesk) - The New Zealand dollar is poised to have gained 0.5 percent over the month of April as markets prepare for a likely rate cut by the Reserve Bank of Australia tomorrow and the euro-zone contends with fears of another sovereign debt crisis.

The kiwi rose to 82.20 US cents at 5pm from 81.82 cents at the end of March, and was little changed from 82.21 cents at 8am and 82.19 cents at the close of trading in New York last week. The trade-weighted index was little changed at 72.77 from 72.79 last week. That is virtually unchanged in the month despite comments from the RBNZ that the kiwi remains overvalued, and weak trade figures today.

Investors are geared up for tomorrow's RBA meeting, where the central bank is expected to cut the 4.25 percent target cash rate by either 25 or 50 basis points. Earlier this month, Governor Glenn Stevens said the bank's board wanted to wait and see inflation figures before making a decision on whether to loosen monetary policy. Traders are betting the RBA will cut 106 basis points over the coming 12 months, according to the Overnight Index Swap curve.

"Twenty-five basis points looks like a certainty - the argument against 50 basis points is that if they were going to cut aggressively, surely they would have cut last time," said Stuart Ive, currency strategist at HiFX in Auckland. "There's enough out there in terms of uncertainty to keep us around this 82.50 US cents level."

Fears European sovereigns may break away from the single-currency region have re-emerged as general elections in France, Greece and the Netherlands throw up opposition candidates calling for an exit from the euro and a backdown from stern austerity measures.

Ive said markets are "very confused" and are struggling to keep up with the glut of economic data and political manoeuvring.

Traders largely ignored New Zealand data, which showed a smaller trade surplus in March than expected, and a pick-up in building consents. The National Bank Business Outlook also showed growing optimism among firms about the prospects for New Zealand's economy.

The first round of local employment data comes out tomorrow with the Quarterly Employment Survey and Labour Cost Index, ahead of Thursday's Household Labour Force Survey.

Markets will be watching for Chinese manufacturing figures out tomorrow, but Ive said the main event this week will be US employment data on Friday.

A BusinessDesk survey of seven strategists found they expect the kiwi dollar will continue to trade in recent ranges this week. The currency has been trading in a two US cents range for the past seven weeks, the longest stretch since a 10-week run in September/October 2006.

The kiwi was little changed at 78.61 Australian cents from 78.54 cents last week, and fell to 65.87 yen from 67.97 yen. It was unchanged at 62.01 euro cents from the close of trading last week, and was little changed at 50.47 pence from 5053 pence.

(BusinessDesk)

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