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

 

Fossils: Ancient Penguins Lived Alongside Dinosaurs?

Penguins are much older than previously thought and their evolution probably dates back to the days of the dinosaurs, according to research on the fossilised leg bone and toes of a giant ancient penguin found in rocks near Waipara, North Canterbury. More>>

No Voda/Sky: Commission Declines Clearance For Merger

The Commerce Commission has declined to grant clearance for the proposed merger of Sky Network Television and Vodafone New Zealand. More>>

ALSO:

EARLIER:

Power: IEA Report On New Zealand's Energy System

Outside of its largely low-carbon power sector, managing the economy’s energy intensity and greenhouse gas emissions while still remaining competitive and growing remains a challenge. More>>

ALSO:

NASA: Seven Earth-Size Planets Around A Single Star

NASA's Spitzer Space Telescope has revealed the first known system of seven Earth-size planets around a single star. Three of these planets are firmly located in the habitable zone, the area around the parent star where a rocky planet is most likely to have liquid water. More>>

ALSO:

Auckland Transport Case: Men Guilty Of Corruption And Bribery Will Spend Time In Jail

Two men who were found guilty of corruption and bribery in a Serious Fraud Office (SFO) trial have been sentenced in the Auckland High Court today... The pair are guilty of corruption and bribery offences relating to more than $1 million of bribes which took place between 2005 and 2013 at Rodney District Council and Auckland Transport. More>>

ALSO:

Hager Raid: Westpac Wrong To Release Bank Records To Police

The Privacy Commissioner has censured Westpac Banking Corp for releasing without a court order more than 10 months of bank records belonging to the political activist and journalist Nicky Hager during a police investigation into leaked information published in Hager's 2014 pre-election book, 'Dirty Politics'. More>>

ALSO:

EARLIER:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news