NZ dollar rises as chances of OCR cut fade

The New Zealand dollar rebounded amid renewed debate about whether the Reserve Bank would cut interest rates again from current record lows.

The kiwi was trading at US63.87c at 5pm yesterday from US63.63c at 8am and at A93.94c from A93.82c.

“I think New Zealand is being seen as a better choice of a bad bunch,” says Peter Cavanaugh, the senior client adviser at Bancorp Treasury Services.

That view follows poor data from Japan, China, Europe and Britain, on top of weak jobs figures from Australia on Thursday.

On Wednesday, the RBNZ left its official cash rate unchanged at 1 per cent, surprising the market, which had been pricing in an 80 per cent chance of a cut.

“The thought that our Reserve Bank isn’t going to do much more with the cash rate means New Zealand is suddenly sticking out more from the pack,” Cavanaugh says.

While the Australian market is pricing in a

60 per cent chance the expected cut will come as early as February, the New Zealand market is giving the chances of an RBNZ cut in February only a 35 per cent likelihood. That rises to a 65 per cent chance in the second half of next year.

Hopes the US and China will sign the first phase of a trade agreement soon continues to add a positive tone to global markets.

The NZ dollar was trading at 49.59 British pence from 49.38, at 57.92 euro cents from

57.71, at 69.37 Japanese yen from 68.87, and at 4.4749 Chinese yuan from 4.4665. The trade-weighted index was at 70.64 from

70.46 points. The two-year swap rate edged up to a bid price of 1.1650 per cent from

1.1629 per cent on Thursday while 10-year swaps fell to 1.5175 per cent from 1.5350.