Kiwi dollar ends week on stronger note

The New Zealand dollar is headed for a 0.6 per cent weekly gain after getting a lift from a more dovish US Federal Reserve and solid fourth-quarter domestic growth data.

The kiwi traded at US68.86c at 5pm yesterday from US68.72c at 8am and US68.43c last Friday in New York. The trade-weighted index was at 74.50 from 74.36.

The kiwi got a lift when the Fed held interest rates steady at 2.25-2.50 per cent this week and signalled no further interest rate hikes this year.

“The Fed was arguably more dovish than the market was expecting,” said Mark Johnson, private client manager at OMF.

That was followed by news the domestic economy grew 0.6 per cent in the fourth quarter. While that was below the 0.8 per cent tipped by the central bank, it was in line with economists’ expectations.

“While it came in as expected, the market was probably positioned short kiwi going into that,” Johnson said.

Attention has now shifted to next week’s RBNZ monetary policy review, with a decision due on Wednesday. The central bank is widely expected to keep rates on hold at a record low 1.75 per cent and reiterate that the next move could be up or down.

But economists remain split on whether or not a cut is actually on the cards.

Market pricing shows there is a 68 per cent chance of a cut in November and the statement will be closely scrutinised for any clues as to whether the bank would move to lower the official cash rate at some point.

Until next Wednesday, “we are back in a bit of a holding pattern”, said Johnson.

The New Zealand dollar traded at 52.40 British pence from 52.56 pence, A96.90c from A96.69c, 60.53 euro cents from 60.51, 76.29 yen from 76.12 and 4.6158 Chinese yuan from 4.6003.