NZ dollar pops above 84 US cents as focus turns to Yellen's speech at Jackson Hole
By Tina Morrison
Aug. 22 (BusinessDesk) - The New Zealand dollar gained overnight, popping back above the key 84 US cent level, as traders look to an upcoming speech by US Federal Reserve chair Janet Yellen to the annual Jackson Hole gathering of central bank governors, amid speculation on how soon interest rates will rise next year in the world's largest economy.
The kiwi rose to 84.03 US cents at 8am in Wellington, from 83.57 cents at 5pm yesterday. The trade-weighted index increased to 79.19 from 78.91 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, slipped from its highest level in almost a year as traders weigh whether they read too much into suggestions in the Fed's minutes to its last meeting, where some thought comments about a better labour market signalled the Fed could hike rates sooner than previously expected. The focus is now on Yellen's speech, scheduled for 2am New Zealand time tomorrow, on "re-evaluating labor market dynamics"
"The New Zealand dollar/US dollar found its feet overnight as the US dollar broadly weakened," Kymberly Martin, senior market strategist at Bank of New Zealand, said in a note. "The US dollar has given up much of its post-Fed minute gain. The market is likely looking toward Fed Chair Yellen's speech at Jackson Hole this weekend. The risk is she pours cold water over yesterday's Fed minutes by reverting to a highly dovish script on the US labour market."
The kiwi has support at 83.50 US cents and faces resistance at 84.40 cents, the BNZ's Martin said.
Traders will also be eyeing a speech by European Central Bank president Mario Draghi at Jackson Hole, scheduled for 6:30am tomorrow New Zealand time, and Bank of England deputy governor for monetary policy Ben Broadbent tomorrow evening.
The New Zealand dollar advanced to 63.26 euro cents from 63.09 cents yesterday, rose to 50.68 British pence from 50.43 pence, increased to 87.23 yen from 86.76 yen and was little changed at 90.34 Australian cents from 90.32 cents.