NZ dollar bounces off four-year low; seen weaker
By Jenny Ruth
Sept. 23 (BusinessDesk) - The New Zealand dollar rose but remained near a four-year low as optimism for a trade deal
between the United States and China fades.
The kiwi was trading at 62.74 US cents at 5:05pm in Wellington from 62.58 at 7:45am. The trade-weighted index was at
69.84 points from 69.64.
On Friday in New York, the currency fell as low as 62.50 cents, its lowest level since September 2015.
Mark Johnson, a dealer at OMF, says the combination of Chinese agricultural officials cutting their visit to the US
short by cancelling planned farm visits and mixed signals from US President Donald Trump have contributed to the waning
sentiment.
Trump had said he would consider an interim deal, then said he was aiming for a comprehensive deal and then said he
doesn't need a deal before the next US election in November 2020, successfully muddying the waters, Johnson says.
"I think the kiwi is still looking pretty vulnerable and the trade-weighted index is looking fairly awful as well." The
TWI has fallen below the trend-line support level going back to 2011.
Last week, the Federal Reserve cut its Fed Funds rate by 25 basis points to 1.75-2 percent, with uncertainty around
trade policy among its reasons.
"Although the Fed was a little bit more hawkish than expected last week, what they did say was that if downside risks to
the economy grow as a result of the trade war, if that persists, then of course they will cut rates," Johnson says.
The market is also betting that the Reserve Bank of Australia will cut rates again in early October. It has priced in
about an 80 percent chance of that happening following weak jobs data last week.
RBA governor Philip Lowe is giving a speech tomorrow evening entitled "An Economic Update" which will be closely
watched.
"There is a school of thought that he could use that as a platform to signal that the October cut is coming," Johnson
says.
On Wednesday, New Zealand's Reserve Bank will also review its official cash rate but market pricing suggests the chances
of a rate cut are relatively slim, although most are expecting a rate cut in November.
The kiwi was trading at 92.55 Australian cents from 92.33, at 50.25 British pence from 50.21, at 56.90 euro cents from
56.81, at 67.57 yen from 67.42 and at 4.4617 Chinese yuan from 4.4382.
The two-year swap rate eased to a bid price of 0.9234 percent from 0.9325 on Friday, while 10-year swaps fell to 1.2275
percent from 1.2400.
(BusinessDesk)