Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ dollar weakens as investors pull back bets on rate hikes

NZ dollar weakens as investors pull back bets on interest rate hikes

By Tina Morrison

May. 30 (BusinessDesk) - The New Zealand dollar fell as investors pulled back their expectations for future interest rate hikes as they weigh weaker commodity prices and a slide in business confidence.

The kiwi dropped to 84.71 US cents at 8am in Wellington, from 84.80 cents at 5pm yesterday. It touched a low of 84.49 US cents, a level not seen since March 12, before the central bank started hiking interest rates on March 13. The trade-weighted index slipped to 79.07 from 79.18 yesterday.

New Zealand's Reserve Bank has raised the benchmark interest rate twice this year and signalled further hikes are in the pipeline. Investors are pulling back their expectations for rates to rise in the near term on concern about the effect of falling commodity prices on the economy, after Fonterra Cooperative Group pulled back its forecast payouts to farmers following weaker dairy prices, and after business confidence fell for a third month.

"The futures market is now taking off two rate hikes at the front end of the curve," said Martin Rudings, a senior adviser at OMF. "The kiwi essentially was bought up on all those rate hikes and if you take half a percent off you have got to consider its correction is appropriate for that."

Investors who bought the kiwi betting it would rise as interest rates went up, known as a 'long' bet, are now selling the currency, Rudings said.

"There's a lot of longs from offshore that have been taking advantage of the yield that has been priced in the curve so when that starts to disappear those longs exit." he said.

In New Zealand today, traders will be eyeing statistics on building consents for April and Reserve Bank data on household credit.

The kiwi fell to its lowest level against the Australian dollar so far this year, touching 90.93 Australian cents this morning, from 91.37 cents yesterday.

"There's been quite a big build up of long kiwi against the Aussie over the last 18 months and we are just starting to see that being unwound," said OMF's Rudings. "We have seen quite a large flow of selling kiwi/Aussie cross that's just depressing the kiwi. We can't cope with those types of flows very well."

Rudings said the kiwi may have peaked at 91.50 Australian cents for the short term.

The kiwi may remain under pressure until the upcoming Reserve Bank monetary policy statement on June 12 which is expected to provide a clearer track on the future interest rate path, Rudings said.

The local currency is also under pressure from a weaker euro, which is underpinning the greenback, and a decline in US 10-year Treasuries, considered a benchmark for global interest rates, Rudings said.

The New Zealand dollar slipped to 62.28 euro cents from 62.33 cents yesterday, was little changed a 50.67 British pence from 50.70 pence and weakened to 86.18 yen from 86.25 yen.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Forestry: Man Charged After 2013 Death

Levin Police have arrested and charged a man with manslaughter in relation to the death of Lincoln Kidd who was killed during a tree felling operation on 19 December 2013. More>>

ALSO:

Smells Like Justice: Dairy Company Fined Over Odour

Dairy company fined over odour Dairy supply company Open Country Dairy Limited has been convicted and fined more than $35,000 for discharging objectionable odour from its Waharoa factory at the time of last year’s ”spring flush” when milk supply was high. More>>

Scoop Business: Dairy Product Prices Decline To Lowest Since July 2012

Dairy product prices dropped to the lowest level since July 2012 in the latest GlobalDairyTrade auction, led by a slump in rennet casein and butter milk powder. More>>

ALSO:

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Insurers Up For More Payouts: Chch Property Investor Wins Policy Appeal In Supreme Court

Ridgecrest NZ, a property investor, has won an appeal in the Supreme Court over insurance cover provided by IAG New Zealand for a Christchurch building damaged in four successive earthquakes. More>>

ALSO:

Other Cases:

Royal Society: Review Finds Community Water Fluoridation Safe And Effective

A review of the scientific evidence for and against the efficacy and safety of fluoridation of public water supplies has found that the levels of fluoridation used in New Zealand create no health risks and provide protection against tooth decay. More>>

ALSO:

Scoop Business: Croxley Calls Time On NZ Production In Face Of Cheap Imports

Croxley Stationery, whose stationery brands include Olympic, Warwick and Collins, plans to cease manufacturing in New Zealand because it has struggled to compete with lower-cost imports in a market where the printed word is giving way to electronic communications. More>>

ALSO:

Prefu Roundup: Forecasts Revised, Surplus Intact

The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news