NZ dollar jumps as Orr named governor, Fed hike seen 100% priced in
By Jonathan Underhill
Dec. 11 (BusinessDesk) - The New Zealand dollar jumped after NZ Superannuation Fund chief Adrian Orr was named as next governor of the Reserve Bank, installing a seasoned veteran well known by the business community and possibly more hawkish than the incumbent.
The kiwi rose to 68.86 US cents as at 5pm in Wellington from 68.34 cents at the start of the day, which was little changed from Friday in New York. The trade-weighted index rose to 72.96 from 72.49.
Finance Minister Grant Robertson said Orr came with the unanimous recommendation of the Reserve Bank's board and had "the technical and leadership qualities" to be governor and "the skills necessary to successfully lead the bank through a period of change." He has been head of NZ Super for eight years and before that was deputy RBNZ governor and head of financial stability, prior to that he had jobs including Westpac Banking Corp chief economist and both state and private sector roles.
"The market regards him as sitting a bit more in the hawkish camp," said Alex Hill, head of dealing at HiFX. Globally, "there's a real focus on central bank rhetoric at the moment - people are looking for clues." Orr is regarded as having "a good pedigree, he's well-known in the business community."
The kiwi didn't move much after Robertson gave a second speech setting out the government's budgetary intentions. He reiterated that the government would cancel tax cuts planned for next year and dump policies deemed as low priority to fund its policy programme. He also said the Half-Year Fiscal and Economic Update and Budget Policy Statement on Thursday would include Treasury costings of the government's ‘100-day-plan’ including a families package and resumption of NZ Super Fund contributions.
Hill said the HYEFU is likely to be overshadowed on Thursday morning because it comes on the heels of the Federal Reserve's policy decision, which is "10 percent priced in" to include another hike to US interest rates. The Fed's hikes this year, though, have been followed by some disappointment in the market which has seen the greenback weaken because the Fed has been content to raise and then wait for more evidence of inflation and growth in upcoming data.
Given a hike is already expected, the greenback would be unlikely to rally unless the Fed raises rates "and says it is going to do it again next month, and the month after that," he said.
Thursday is book-ended by central banks, with decisions also expected from the European Central Bank and the Bank of England, although a hike isn't expected out of either of them.
The kiwi didn't move much after figures showed retail spending on electronic cards rose in November, boosted by higher fuel prices and store sales. More evidence of consumer sentiment is due out this week with consumer confidence for the fourth quarter out tomorrow from Westpac and the ANZ Roy Morgan consumer confidence survey for December due on Thursday.
The local currency rose to 51.40 British pence from 51.14 pence last week. It rose to 58.44 euro cents from 58.21 cents on Friday in New York and advanced to 78.18 yen from 77.55 yen. It rose to 91.53 Australian cents from 91.18 cents last week and rose to 4.5562 yuan from 4.5353 yuan.
New Zealand’s two-year swap rate rose 1 basis point to 2.15 percent and the 10-year swaps riose 4 basis points to 3.11 percent.