NZ dollar drops on prospect of flatter rate track in RBNZ policy review
Aug. 9 (BusinessDesk) - The New Zealand dollar extended its decline on growing anticipation the Reserve Bank will take a more dovish tone and may adopt an even flatter interest rate track in tomorrow's monetary policy statement.
The kiwi fell to a three-week low and was trading at 73.23 US cents as at 8am in Wellington from 73.53 cents yesterday. The trade-weighted index declined to 77.19 from 77.43 yesterday.
New Zealand's currency has dropped 2.5 percent so far this month as softer-than-expected data and a paring back of inflation expectations prompted traders to reduce bets the Reserve Bank will be forced to raise interest rates earlier than the 2019 date projected in its May forecast. Governor Graeme Wheeler will deliver his final MPS tomorrow, and while no change is predicted in the record low 1.75 percent official cash rate, some analysts predict any projected increase may come even later. Meantime, the greenback has been buoyed by stronger than expected employment growth, and the June JOLTS survey of job openings showed rising demand for labour in the world's biggest economy.
"The NZD remains somewhat heavy ahead of the RBNZ on Thursday, though a firmer USD has also helped of late with robust data meaning the same for the currency," ANZ Bank New Zealand chief economist Cameron Bagrie said in a note. "Market views are increasingly congregating on the RBNZ bill track being flat-lined; any sign of a hiking bias (even softly within the projections) risks sending the NZD right back up."
With no local data, traders will be watching for Chinese inflation figures ahead of tomorrow's RBNZ review. Figures yesterday showed Chinese import and export growth in July was slower than expected and the New Zealand dollar fell to 4.9113 Chinese yuan from 4.9250 yuan.
The kiwi traded at 62.29 euro cents from 62.26 cents yesterday after data showed Germany's trade surplus missed projects, and it traded 56.35 British pence from 56.37 pence.
The local currency fell to 92.53 Australian cents from 92.90 cents yesterday and dropped to 80.82 yen from 81.33 yen.