Kiwi holds as traders await Fed’s meeting

The New Zealand dollar was little changed, holding above US73c as traders debate whether Federal Reserve chair Janet Yellen will give a clear signal on the timing and pace of US interest rate hikes when she addresses fellow central bankers at Jackson Hole.

The kiwi traded at US73.10c as at 5pm yesterday, from US73.16c on Thursday. The tradeweighted index slipped to 77.40 from 77.50.

With little domestic economic data of note, all eyes have been on the Jackson Hole symposium of central bankers amid questions about whether Yellen will echo the comments of other Fed officials in suggesting the central bank is close to a rate hike.

That would provide some relief for Reserve Bank governor Graeme Wheeler who defended current monetary policy this week in the face of stubbornly low inflation and a high Kiwi dollar, while reiterating that another cut to the official cash rate is likely.

“The market is waiting on tenterhooks for Janet Yellen and really hoping we’re going to see some firm indications on when they are going to raise rates,” said Michael Johnston, senior trader at HiFX.

While the market still sees the prospects of a rate hike by the Fed in December, “this time last year the market was expecting to see three or four rate hikes in 2016 and we’ve yet to see one”, he said.

The kiwi fell to A95.77c from A95.92c and rose to 4.8695 yuan from 4.8665 yuan. It declined to 64.74 euro cents from 64.91c and was little changed at 55.34 British pence from 55.29p. The kiwi slipped to ¥ 73.44 from ¥ 73.50.

New Zealand’s two- year swap rate fell 2 basis points to 1.93 per cent and 10- year swaps declined 3 basis points to 2.36 per cent.