Kiwi dollar heading for weekly gain

The New Zealand dollar is headed for a 0.2 per cent weekly gain against the greenback, benefiting from an uptick in risk appetite, but demand remains capped by the possibility of a domestic rate cut should growth fail to fire.

The kiwi traded at US65.91c at 5pm yesterday versus US65.85c at 8am and US65.83c on Thursday. It traded at US65.79c last Friday in New York. The trade-weighted index was at 71.69 from 71.65.

Markets were more upbeat after China and the US agreed to return to the table for the first time since June, easing fears of a fullblown trade war between the two nations. While the kiwi ticked up slightly, it is largely unchanged from where it was when the Reserve Bank last week said that it would be keeping rates on hold for longer and could even opt for a cut if necessary if growth doesn’t pick up as expected.

In a note entitled “Can’t dodge the doves”, Annette Beacher, chief Asia-Pacific macro strategist for TD Securities, yesterday said the market has now priced in a 33 per cent chance of a rate cut, “which is fair as the markets digest how dovish the RBNZ is”.

The kiwi traded at A90.70c from A90.52c on Thursday, as the Aussie lost some ground. Reserve Bank of Australia Governor Philip Lowe reiterated in testimony to Parliament yesterday that the central bank is in no hurry to lift rates.

The local currency decreased to 4.5351 Chinese yuan from 4.5379 yuan on Thursday and traded at 73.05 yen from 72.91 yen. It was little changed at 57.90 euro cents from 57.83 cents on Thursday and traded at 51.78 British pence from 51.74 pence.

New Zealand’s two-year swap rate rose one basis point to 2.03 while the 10-year swap rate was unchanged at 2.87 per cent.