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

 


NZ dollar holds near 87 US cts as RBNZ 'pauses' mulled

NZ dollar holds near 87 US cents after sell-off as RBNZ 'pauses' mulled

By Jonathan Underhill

July 17 (BusinessDesk) - The New Zealand dollar held near 87 US cents, having shed more than 1 US cent yesterday, as traders mulled the prospects of a pause in the Reserve Bank's tightening cycle given milder-than-expected inflation, weak dairy prices and a trade-weighted index stubbornly higher than the RBNZ expects.

The kiwi traded at 87.09 US cents at 8am in Wellington, from 86.98 cents late yesterday. It has tumbled from more than 88 cents the previous day. The trade-weighted index was at 81.16 from 81.04 yesterday.

Swap rates dropped after the cluster of new information yesterday. Traders still expect governor Graeme Wheeler to raise the official cash rate a quarter point to 3.5 percent next week and are debating how long he may wait before hiking again. Non-tradable inflation, which measures prices not directly exposed to the kiwi dollar, was 0.4 percent in the second quarter, almost half the pace the central bank had expected. Meantime, a further slump in dairy products this week has economists anticipating the economic cycle may peak at a lower level given the dominance of commodities in the nation's export receipts.

"We still consider a July rate hike effectively a done deal, since we can’t imagine the RBNZ would be pleased with market interest rates falling further," said Raiko Shareef, currency strategist at Bank of New Zealand. "The market is much more comfortable with the idea of an extended pause thereafter, which gels with our view.

"Formally, we expect pauses in both the September and October meetings, followed by a 25 basis point rate hike in December. But the risks are now heavily skewed towards the latter becoming a pause, too," he said. "Unless the NZ TWI falls in line with the RBNZ’s expectations in quick order, the growing disconnect between that and NZ commodity prices will weigh on the bank’s interest rate projections."

The Reserve Bank had forecast the TWI to average 80 in the second quarter and 79.7 in the current three months. Wheeler has called the currency "unsustainably high" given the slide in commodity export prices.

Bank of New Zealand says support for the kiwi now kicks in at about 86.50 US cents and resistance at 87.50 cents.

The kiwi rose to 64.40 euro cents, partly reflecting the European currency's weakness against the greenback, from 64.14 euro cents late yesterday and edged up to 50.83 British pence from 50.76 pence. It traded at 88.59 yen from 88.49 yen fell to 92.94 Australian cents from 93.13 cents.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Half Empty: Fonterra's 2017 Opening Forecast Below Expectations

Fonterra Cooperative Group raised its forecast farmgate milk payout for next season by less than expected as the world's largest dairy exporter predicts lower prices will crimp production and supply will pick up. The New Zealand dollar fell. More>>

ALSO:

Pest Control: Mouse Blitz Team Leaves For Antipodes

The Million Dollar Mouse project to rid Antipodes Island of mice is underway with the departure of a rodent eradication team to the remote nature reserve and World Heritage Area. More>>

Gongs Got: Canon Media Awards & NZ Radio Awards Happen

Radio NZ: RNZ website The Wireless, which is co-funded by NZ On Air, was named best website, while Toby Manhire and Toby Morris won the best opinion general writing section for their weekly column on rnz.co.nz and Tess McClure won the best junior feature writer section. More>>

ALSO:

Pre-Budget: Debt Focus Risks Losing Opportunity To Stoke Economy

The Treasury is likely to upgrade its forecasts for economic growth in Budget 2016 next week but Finance Minister Bill English has already signalled that more of his focus is on debt repayment than on fiscal stimulus or tax cuts... More>>

ALSO:

Fulton Hogan's Heroes: Managing Director Nick Miller Resigns

Fulton Hogan managing director Nick Miller will leave the privately owned construction company after seven years in charge. The Dunedin-based company has kicked off a search for a replacement, and Miller will stay on at the helm until March next year, or until a successor has been appointed and a transition period completed. More>>

ALSO:

Gordon Campbell: On Electricity, Executions, And Bob Dylan

The Electricity Authority has unveiled the final version of its pricing plan for electricity transmission. This will change the way transmission prices (which comprise about 10% of the average power bill) are computed, and will add hundreds of dollars a year to power bills for many ordinary consumers. More>>

ALSO:

Half Empty: Fonterra NZ, Australia Milk Collection Drops In Season

Fonterra Cooperative Group says milk collection is down in New Zealand and Australia, its two largest markets, in the first 11 months of the season during a period of weak dairy prices. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news