Wednesday 11 January 2017 05:00 PM
NZ dollar continues drop against Aussie dollar, down 2% since Jan 3 high
By Edwin Mitson
Jan. 11 (BusinessDesk) - The New Zealand dollar traded at its lowest level against the Australian dollar since November, and has fallen more than 2 percent since the start of 2017 as it broke out of a key trading range.
The kiwi traded at 94.77 Australian cents at 5 pm in Wellington, down from 94.81 cents yesterday and 95.38 cents on Monday. It had reached as high as 96.74 Australian cents on Jan 3.
Currency traders said the move reflected the different markets Australia and New Zealand have with China, with Australia benefiting from a resurgence in the price of iron ore off the back of Chinese demand. However the Australian government has suggested the current high price is unlikely to be sustained, and mining companies have been wary about ramping up capital spending in case demand falls away.
Chris Weston, Chief Market Strategist at IG Markets in Sydney said Australian dollar bulls had regained control of the trade.
"Between late November through to early parts of January, there was a lot of supply coming into the market when one Australian dollar bought $1.05 kiwi dollars. Any kind of moves above there were smacked down straight away by people supplying the market with kiwis. But then on Tuesday, we saw a really strong move through the $1.05, and that’s taken out all the supply"
"We’ve broken out the top end of that range, we’ve taken out supply, and we’ve seen a strong conviction behind that buying,” he added.
The local currency was trading at 69.97 US cents at 5 pm in Wellington, from 69.85 US cents at 8 am and 70.38 US cents twenty-four hours ago. The trade-weighted index dropped to 77.45 from 77.83 this time yesterday. Currency markets are largely waiting for President Trump's first press conference since his election victory, expected to be held in the early hours of Wednesday morning, local time.
The kiwi fell against the British pound, falling to 57.46 pence from 57.84 pence yesterday, with sterling steadying after a sell-off driven by British Prime Minister Theresa May's comments that the UK was willing to cede access to the European single market in order to secure its borders.
Against the Chinese yuan, the kiwi fell to 4.8432 yuan from 4.8741 yuan twenty-four hours ago. It dropped slightly against the Japanese yen, to 81.12 yen from 81.17 yen. It was flat against the Euro at 66.30 euro cents.
New Zealand's two-year swap rate was unchanged at 2.35 percent, while the 10-year swap rate rose 1 basis point to 3.38 percent.