Kiwi inches up as investors await unfolding events abroad

The New Zealand dollar was slightly higher as investors await events abroad, including a raft of United States data, minutes from the US Federal Reserve and a highly anticipated meeting between US President Donald Trump and his Chinese counterpart Xi Jinping.

The kiwi traded at US67.84c at 5pm from US67.73c at 8am in Wellington and US67.79c on Friday in New York.

The trade-weighted index was at 74.10, unchanged from late Friday in Wellington.

The kiwi initially fell about 30 points against the greenback when Stats NZ data showed retail sales were flat on a seasonally adjusted basis in the three months to September 30.

Economists had expected a 1 per cent increase in the volume of trade.

Mike Shirley, senior dealer, FX & Interest Rate Sales at KiwiBank, said the data drove the sell-off but it was a “knee-jerk reaction”. “Then the dust settles and everyone assesses the data and it retraces back up.”

Over the week he expects the kiwi will be driven by offshore events.

“There is an enormous amount of offshore data this week and very little on the domestic front so once again the New Zealand dollar is going to be a bit of a sail-less dinghy bouncing around on a sea of volatility.”

He pointed to US consumer confidence data, the personal consumption expenditure indicator — considered the US Federal Reserve’s preferred measure of inflation — and minutes from the Fed’s latest monetary policy meeting.

He said there is a growing belief the Fed may not hike as aggressively in 2019 as previously expected and the minutes will be closely scrutinised to see if they start hinting in that direction. That will curb the greenback and boost the kiwi. Also markets hoped for progress at the weekend’s G20 in the US-China trade skirmish.

The kiwi traded at 52.94 British pence from 52.74p last week, at €59.82c from €59.74c, ¥76.80 from ¥76.53, unchanged at A93.66c, and at 4.7119 yuan from 4.7078 yuan.

New Zealand’s two-year swap rate fell 1 basis point to 2.11 per cent; the 10-year swaps were down 3 basis points at 2.94 per cent.