Kiwi up a cent as US dollar keeps sliding

The New Zealand dollar is heading for a gain of more than US1c for the week as the greenback continued to slide after the Federal Reserve turned dovish earlier this week.

The kiwi was trading at US65.96c at 5:05pm yesterday from US65.89c at 7:45am and US64.89c in New York last Friday. The trade-weighted index was at 72.14 points from 72.05.

“There’s a race to the bottom on interest rates across the globe and the US has just jumped on that bandwagon,” said Peter Hunt, foreign exchange and interest rate sales manager at Kiwibank.

Early on Thursday, the Fed removed the word “patient” from its outlook and said it is prepared to do whatever is “appropriate to sustain the expansion” as the US economy starts to show signs of weakness and the USChina trade war rages on.

The market is hoping a meeting between US President Donald Trump and Chinese President Xi Jinping at the upcoming G20 meeting in Japan will pave the way for the two nations to settle their trade differences.

Also helping buoy the kiwi were comments on Thursday by Reserve Bank of Australia governor Philip Lowe who said in a speech that the rate cut in Australia earlier this month will support the economy.

The RBA cut its cash rate from 1.5 per cent to 1.25 per cent from June 5.

Next week, it will be the turn of New Zealand’s Reserve Bank to review its official cash rate. In May, when it cut the OCR from 1.75 per cent to 1.5 per cent, RBNZ suggested the chance of another cut was “finely balanced”.

Westpac is predicting the RBNZ will keep the OCR steady next week and that it will cut again in August.

“The balance of risks has evolved in the direction of another cut, mainly due to global developments,” says Westpac chief economist Dominick Stephens. “But not so emphatically that the RBNZ needs to appear panicked by cutting the OCR again so soon.”

The kiw was trading at A95.14c from A95.15c, at 51.92 British pence from 51.86p, and at 58.37 euro cents from €58.34c.