NZ dollar weakens as Fed's Yellen less dovish than expected
NZ dollar weakens as Fed's Yellen less dovish than expected at Jackson Hole
By Tina Morrison
Aug. 25 (BusinessDesk) - The New Zealand dollar weakened on US dollar strength after Federal Reserve chair Janet Yellen was less dovish than expected in her speech to an annual gathering of world central bankers at Jackson Hole, Wyoming.
The kiwi slipped to 83.86 US cents at 8am in Wellington, from 84.07 cents at the New York close and 84.10 cents at 5pm in Wellington on Friday. The trade-weighted index was at 79.23 from 79.18 on Friday.
Yellen, one of the Fed policy makers considered less upbeat about the US economy, was more balanced than expected in her speech to central bankers at the weekend. While she reiterated her view that there is still significant slack in the US labour market, Yellen also said increases in the Federal funds rate target may come sooner than the Federal Reserve Open Market Committee currently expects and could then proceed at a more rapid pace.
"Her balanced approach turned out to be a relief for dollar bulls because it does not rule out the possibility of a less dovish view at next month's Fed meeting," Kathy Lien, managing director of foreign exchange strategy for BK Asset Management in New York, said in a note. "In a nutshell, investors bid up the dollar when they realised that Yellen said nothing to discourage the hawks."
The New Zealand dollar touched 63.62 euro cents over the weekend, its highest in more than a week, after European Central Bank president Mario Draghi told the Jackson Hole conference that the bank is ready to adjust monetary policy further to stimulate the region's economy. The kiwi was trading at 63.50 euro cents at 8am from 63.29 cents at 5pm Friday.
The kiwi touched a month-high 87.75 yen over the weekend, and was trading at 87.41 yen at 8am from 87.25 yen on Friday. The Bank of Japan will continue to maintain its current monetary policy stance in order to achieve its 2 percent inflation goal, but it won't hesitate to make adjustments to the policy if needed, governor Haruhiko Kuroda told reporters on the sidelines of the Jackson Hole gathering.
The New Zealand dollar edged lower to 90.18 Australian cents from 90.24 cents on Friday and was little changed at 50.68 British pence from 50.70 pence.