Kiwi ends week higher, iron ore boosts Oz dollar

The New Zealand dollar unwound Thursday’s gains against the Australian dollar but still ended the week higher, despite improving iron ore prices giving the Aussie a boost.

The kiwi was trading at A92.97c at 5pm yesterday from A93.70c on Thursday and A92.28c late on Friday a week ago in New York. Against the greenback, it finished the week at US70.01c from US69.97 cents and from A70.37c on Thursday.

The kiwi gained strongly on Thursday against both the Aussie and the greenback on news that consumer prices rose at their fastest annual pace since the September 2011 quarter in the first three months of 2017, solidifying market expectations the central bank will lift rates sooner than it’s forecasting.

Market pricing yesterday continued to point to a rate hike next March, well ahead of the RBNZ’s forecast mid- 2019. New Zealand’s two- year swap rate rose 1 basis point to 2.31 per cent and 10- year swaps rose six basis points to 3.32 per cent.

The kiwi, however, opened weaker after Dallas Federal Reserve president Robert Kaplan affirmed his view that the US central bank will lift rates another two times this year, stoking demand for the greenback. Also helping US dollar sentiment were comments from US Treasury Secretary Steven Mnuchin that he would unveil a plan to cut taxes and predicted it would be passed by Congress this year.

Mark Johnson, a senior foreign exchange dealer at OMF in Wellington, said iron ore “had a good bounce overnight [ Thursday], which gave the Aussie a lift and the bit of a rebound in the Aussie may have dragged us down a bit”, although the kiwi was supported at A92.8c.

Both the Aussie and the kiwi will likely be pushed around by the French presidential election this weekend, in particular after the shooting on the Champs- Elysees.