Kiwi dollar heading for weekly gain

The New Zealand dollar is headed for a 1.1 per cent weekly gain after the US Federal Reserve was cautious about future rate increases and markets were optimistic about the prospect of a US-China trade deal.

The kiwi traded at US69.09c from US69.15c on Thursday. It traded at US68.37 a week ago in New York. The trade-weighted index was at 74.39 from 74.24.

Markets were upbeat that the US and China will be able to strike a trade deal as both sides said there had been progress. Trade tensions have weighed on sentiment given the potential negative impact on global growth. According to different news reports, a US trade delegation will now visit China in mid-February for a new round of talks.

Martin Rudings, a foreign exchange dealer at OMF, said we are likely to see “choppy range trading until we see some clarity” on the trade front.

The kiwi had already lifted to a six-week high on Thursday after the US Federal Reserve said it will be patient when it comes to any future interest rates, comments that weighed sharply on the greenback. It was also supported when Standard & Poor’s lifted its outlook on the New Zealand sovereign rating to “positive”. They were joined by Fitch Ratings, which affirmed New Zealand’s longterm foreign currency issuer default rating at AA and retained a stable outlook.

Rudings said one thing that is capping further gains in the kiwi is increased talk of rate cuts due to possible tightening of credit for the banks if the Reserve Bank’s proposed doubling of required bank capital is implemented.

The kiwi traded at A95.40c from A95.13c on Thursday, and at 4.6484 Chinese yuan from 4.6339 yuan. The local currency decreased to 75.22 yen from 75.28 yen on Thursday and traded at 52.74 British pence from 52.65 pence. It rose to 60.37 euro cents from 60.11 cents. The two-year swap rate is unchanged from late Thursday at 1.9000 per cent; the 10-year swap rate is at 2.4900 from 2.5150.