NZ dollar weaker than forecast

The New Zealand dollar is weaker than the central bank forecast on a trade- weighted basis at the end of the first quarter, although it has largely held its ground against the greenback, benefiting from disappointment over US President Donald Trump’s failure to deliver on campaign pledges.

In its February monetary policy statement, the Reserve Bank forecast the tradeweighted index would average 79 in the March quarter. It was trading at 75.88 at 5pm yesterday versus 77.42 at the beginning of the quarter.

One of the biggest moves over the quarter has been the decline against the Australian dollar. It was trading at A91.40c at 5pm yesterday versus A95.62c at the start of the quarter. The aussie has benefited from stronger prices of metals and iron ore and the central bank’s upbeat view of the economy.

While it had staged a bit of a comeback in recent weeks, Westpac Banking Corp strategist Imre Speizer said the trend was for the aussie to go higher, in particular given rising hard commodity prices. Dairy prices, on the other hand, appeared to be waning, which had weighed on the kiwi.

Against the greenback, the kiwi was trading at US69.86c versus US70.26c on Thursday and US69.34c at the beginning of the quarter. While it ended the quarter virtually unchanged, it traded as high as US73.74c on February 7 after weak data in the US. The US dollar also suffered when Trump failed to repeal the so- called Obamacare legislation, as markets began to speculate he may have trouble with future tax and border control legislation.

Speizer said, however, the market pushed the US dollar too far and it was now rebounding, a trend he expected would continue.

The kiwi rose to 65.44c from 65.33c It fell to 55.95 British pence from 56.44p and rose to ¥ 78.29 from ¥ 78.14. It fell to 4.8162 yuan from 4.8435 yuan.

The two- year swap rate rose 1 basis point to 2.31 per cent while 10- year swaps rose 5 basis points to 3.44 per cent.