NZ dollar jumps vs. Sterling as BoE rate hike chance dims

NZ dollar jumps higher vs. British pound as investors push out bets for BoE rate hike

By Tina Morrison

Nov. 6 (BusinessDesk) - The New Zealand dollar jumped higher against the British pound after the Bank of England kept interest rates unchanged and gave no signal it was looking to raise the benchmark anytime soon.

The kiwi increased to 43.52 British pence at 8am in Wellington, from 42.88 pence at 5pm yesterday. The local currency advanced to 66.20 US cents from 65.96 cents yesterday ahead of the closely watched US nonfarm payrolls report.

Sterling weakened after the Bank of England dashed expectations it would closely follow the Federal Reserve in raising interest rates. The BoE forecast that near-zero inflation would pick up only slowly, trimmed its expectation for economic growth for this year and next, and highlighted risks from emerging markets. That prompted investors to push expectations for a BoE rate hike out to the end of next year, from early next year.

"The Bank of England struck a dovish tone. Sterling declined sharply in response," ANZ Bank of New Zealand senior economist Sharon Zollner and economist Dylan Eades said in a note. "The BoE appears to be comfortably on hold for the time being, wishing to gauge the impact of stronger domestic economic conditions and the softer external environment on the inflationary environment."

ANZ expects the kiwi to trade between 43 British pence and 43.80 British pence today.

In New Zealand today, the government publishes its financial statements for the three months to September.

The New Zealand dollar advanced to 92.61 Australian cents from 92.17 cents yesterday ahead of the release of the Reserve Bank of Australia Statement on Monetary Policy, which is expected to affirm its modest easing bias.

The kiwi gained to 60.90 euro cents from 60.65 cents yesterday, rose to 80.60 yen from 80.12 yen and increased to 4.2010 yuan from 4.1838 yuan. The trade-weighted index rose to 71.78 from 71.41 yesterday.

(BusinessDesk)

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