Kiwi dollar heading for weekly gain

The New Zealand dollar is headed for a 1.2 per cent weekly lift, underpinned by strong domestic jobs data and a slightly more upbeat central bank, although it pared some gains when the US Federal Reserve reinforced expectations it will raise interest rates in December.

The kiwi traded at US67.33c at 5pm yesterday versus US67.61c at 8.36am and US67.88c late on Thursday. It was at US66.52c late last Friday. The tradeweighted index was at 73.57 from 73.87.

It gained strongly after the domestic unemployment rate hit a decade-low in the third quarter of 3.9 per cent on Wednesday and after Reserve Bank governor Adrian Orr on Thursday held the official cash rate at 1.75 per cent. While the RBNZ reiterated it would remain on hold until December 2020, it did omit a line from the previous statement that its next move could be “up or down”, adding to the view that a rate cut was increasingly unlikely.

It pared some of those gains when the US Federal Open Market Committee reiterated it expects “further gradual increases” in the target range for the fed funds rate, giving the US dollar a lift and underscoring that while New Zealand rates may not go lower, they also won’t be rising any time soon.

Overall, however, the kiwi is still having its “employment honeymoon”, said Martin Rudings, a senior foreign exchange dealer at OMF. “Still, by next week the market will have forgotten those numbers.”

Rudings said the US dollar looks poised to rise now the uncertainty surrounding the US Midterm elections has passed.

“The US dollar story is still intact ... the US has the story, they have the robust economy,” he said.

The kiwi traded at A92.98c from A93.28c on Thursday. It was at 51.39 British pence from 51.67 pence on Thursday, and at 59.59 euro cents from 59.40 euro cents. It was at 4.6747 Chinese yuan from 4.7007 yuan and at 76.65 yen from 77.04 yen.

New Zealand’s two-year swap rate rose 3 basis points to 2.18 per cent; the 10-year swaps rose 1 basis points to 3.09 per cent.