NZ dollar hits 3 1/2 mth high vs Pound as BoE's Carney sees no urgency to hike rates
By Paul McBeth
June 21 (BusinessDesk) – The New Zealand dollar rose to a three-and-a-half month high against the British pound after
Bank of England governor Mark Carney talked down the need for early interest rate hikes, while the Reserve Bank's policy
review tomorrow comes into focus for local investors.
The kiwi climbed as high as 57.42 British pence, the highest since March 6, and was trading at 57.32 pence as at 8am in
Wellington from 56.97 pence yesterday. The local currency traded at 72.37 US cents from 72.46 cents yesterday with the
RBNZ review tomorrow expected to reaffirm the central bank's neutral policy guidance.
The British pound dropped 0.9 percent against the greenback after Carney said it wasn't the time to raise interest
rates, warning of anaemic wage growth and a likely hit to British incomes as UK policymakers begin negotiations to quit
the European Union. That comes a week after the Bank of England's split vote on the UK's benchmark rate last week where
three members on the monetary policy committee were in favour of raising rates.
"In contrast to three of his fellow MPC members who voted for a rate increase last week, he signalled no urgency to
raise interest rates anytime soon, owing to concerns about the impact Brexit will have on the economy," Bank of New
Zealand currency strategist Jason Wong said in a note. "The NZD is up on all the major crosses, although apart from
NZD/GBP, gains have been contained to within 0.1-0.5 percent, with much of that occurring during NZ trading hours."
Dairy prices at the latest GlobalDairyTrade auction fell 0.8 percent in the trade-weighted index's first decline since
March, while prices for whole milk powder, New Zealand's key export, dropped 3.3 percent to US$3,022 a tonne. Wong said
that was broadly in line with expectations after recent months showed stronger prices than anticipated.
With no local data today, central banks remain in focus and the RBNZ's review tomorrow is expected to see governor
Graeme Wheeler keep the official cash rate at 1.75 percent and retain his neutral bias.
"Falling oil prices and the stronger NZD will give the bank more confidence that the recent run-up in inflation to over
2 percent is just a temporary phenomenon," Wong said.
Chicago Federal Reserve president Charles Evans told CNBC he still thought US inflation would reach 2 percent, although
recent data made him “a little nervous about that” and that the Fed could wait until December before deciding on another
rate hike.
The kiwi slipped to 80.71 yen from 80.93 yen yesterday, holding near three-and-a-half month highs after the Bank of
Japan stuck to its ultra-loose policy last week at a time when other major central banks are rolling back the stimulus.
The local currency edged up to 65.05 euro cents from 64.07 cents yesterday and increased to 95.58 Australian cents from
95.32 cents. It decreased to 4.9432 Chinese yuan from 4.9498 yuan. The trade-weighted index was at 78.15 from 78.06
yesterday.
(BusinessDesk)
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