NZ dollar pares losses against Aussie as sell-off looks overdone
By Rebecca Howard
July 20 (BusinessDesk) - The New Zealand dollar touched a fresh three-month low against the Australian dollar after
strong Aussie jobs numbers, but pared some of its losses over the course of the day.
The kiwi was trading at 92.51 Australian cents at 5pm versus 92.40 Australian cents at 8.30am in Wellington and 92.77
cents late yesterday. The New Zealand dollar was little changed at 73.45 US cents from 73.52 cents.
"It had a bit of a spike down against the Aussie but then that got taken back," said Westpac Bank senior strategist Imre
Speizer. The kiwi fell to 92.21 Australian cents, the lowest since early May, after the Australian Bureau of Statistics
said unemployment stayed at a seasonally adjusted 5.6 percent in June versus an expected 5.5 percent. The number of
people employed rose by 14,000, compared with an expected 15,000 gain.
The kiwi has lost around 1.5 percent since weak domestic inflation contrasted sharply with a more upbeat economic
outlook from the Reserve Bank of Australia and it "needs a bit of a bounce because it (the move) is overdone," said
Speizer.
He said while interest rate markets are now pricing in a rate hike in Australia in June next year to 1.75 percent versus
a lift in New Zealand in August 2018 to 2.00 percent, both are unlikely. However, "on relatively market pricing, the
market is thinking they (Australia) will go before us," he said.
He said there was little or no reaction after the Bank of Japan pushed back its projected timing to hit its 2.0 percent
inflation goal, with the kiwi trading at 82.32 yen from 82.38 yen. The BOJ now says 2 percent may not be reached for
three more years.
Speizer said the European Central Bank decision later in the global trading day could cause more volatility. "They might
talk about tapering their bond purchase program. That's the big thing to watch for," he said. ECB President Mario Draghi
surprised markets in a late June speech when he indicated the bank would slowly start winding down the programme.
The trade-weighted index was little changed at 77.82 from 77.86 yesterday. The kiwi traded at 56.40 British pence from
56.42 pence and at 63.80 euro cents from 63.73 cents and was at 4.9681 yuan from 4.9680 yuan.
New Zealand's two-year swap rate rose 5 basis points to 2.23 while the 10-year swaps rose 5 basis points to 3.31
percent.
(BusinessDesk)