Nzdusd - page 19
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NZD/USD: Kiwi Defeats Softer Greenback, Will RNBZ Change That?
The New Zealand dollar was higher against its US namesake hours before the Reserve Bank of New Zealand's (RNBZ) rate decision, with markets not expecting any rate cut - despite weak inflation. Demand for the greenback, meanwhile, continued to falter as the currency was down against most of its major peers.
The so-called kiwi appreciated 0.88% to $0.7196 against the US dollar during the late US trading session.
The pair started the day at around $0.7140 levels and soared over 100 pips earlier in the day, as the greenback got knocked down by the Bank of Japan Governor Haruhiko Kuroda, who said that the yen was too weak on an effective exchange rate basis.
Also affecting the greenback, investors continued to lock-in profits from the currency's recent rally, after an above-forecast US jobs report on Friday underlined expectations that the Fed could start to raise rates at its September meeting.
RBNZ decision
While there has been much speculation that the RBNZ is gearing up to cut interest rates this year amid weak inflation settings and emerging signs of slower growth, the bank is not expected to make any moves on Thursday.
The Official Cash Rate (OCR) has been held at 3.5% since mid 2014 when the RBNZ made its last hike of a total 100 basis-point increase to the cash rate last year. (Read our full preview here)
Going lower?
Still, the kiwi may head lower in the near term, Danske Bank predicted on Wednesday as it downgraded its outlook for the NZD/USD pair.
“We have lowered our near-term forecasts a little and see the cross hitting $0.69 in 6 months (previous $0.71). On a 12-month horizon we do, however, expect USD strength to fade, and with upside risks to agricultural prices from a structural point of view, we expect NZD/USD to stabilize around the $0.70 mark and keep our 12-month forecast unchanged at this level," the bank wrote in a note.
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NZD/USD: Kiwi Holds Near 5-Yr Low after Surprise Rate Cut
he market was pricing in less than a 50% chance that the Reserve Bank of New Zealand (RBNZ) would cut interest rates on Thursday, and economists were even more skeptical.
However, the RBNZ saw weak inflation settings and the sharply lower terms of trade as the go-ahead for cutting the cash rate to 3.25% on Thursday, from 3.5% where it had been held since mid 2014.
It was no surprise then that the New Zealand dollar fell to its lowest level since August 2010 shortly after the bank announced its decision.
The NZD/USD pair traded more than 2% lower at $0.7014 right after the decision was made public, and traded some 1.95% lower at $0.7050 once the dust had settled more than an hour after the decision. Ahead of the announcement the currency sat around $0.7190.
The Australian dollar gained more than 2.1% on the New Zealand currency to trade around $1.0978 on Thursday morning in Sydney, the highest the crossrate has been since late November, gaining from $1.0760 before the cash rate was cut.
The RBNZ maintained its stance that the currency was overvalued, and said that a further significant depreciation would be "justified", especially given the low terms of trade.
"The main rationale for the OCR cut was falling dairy prices, which were heavily emphasised through the Monetary Policy Statement, and low actual inflation," Westpac chief economist Dominick Stephens said in a note on Thursday.
Dairy prices have fallen more than 50% from a peak in early 2014, drastically reducing dairy farmers' incomes and the terms of trade. The RBNZ projects that the drop in prices will wipe some $7 billion from the economy this season, representing a fall of about 3% of nominal GDP.
"At their current level, the terms of trade are dragging on growth, rather than boosting it," the bank's Monetary Policy Statement read.
RBNZ Governor Graeme Wheeler said on Thursday that further easing "may be appropriate", but that it would depend on emerging data.
The latest official inflation figures show that the CPI rose only 0.1% annualized in the first quarter, whereas the RBNZ has a target range of 1-3%.
On Thursday the bank indicated that the overvalued currency, weak global inflation, and low wage growth was suppressing inflation in New Zealand.
According to the bank's 90 day bank bill forecasts, the RBNZ sees one more rate cut ahead.
"At this stage, we regard a September follow-up cut as more likely than July," Stephens added, saying that Westpac would confirm this stance later in the day.
source
NZD/USD: Kiwi Plunges to 5-Yr Low after Surprise Rate Cut
The market was pricing in less than a 50% chance that the Reserve Bank of New Zealand (RBNZ) would cut interest rates on Thursday, and economists were even more skeptical.
However, the RBNZ saw weak inflation settings and the sharply lower terms of trade as the go-ahead for cutting the cash rate to 3.25% on Thursday, from 3.5% where it had been held since mid 2014.
It was no surprise then that the New Zealand dollar fell to its lowest level since August 2010 shortly after the bank announced its decision.
The NZD/USD pair traded more than 2% lower at $0.7014 right after the decision was made public, and traded some 2.5% lower at $0.7009 once the dust had settled hours after the decision. Ahead of the announcement, the currency sat around $0.7190.
The Australian dollar gained 2.84% on the New Zealand currency, to trade around $1.1052 on Thursday morning in London, the highest the crossrate has been since late November, gaining from $1.0760 before the cash rate was cut on Thursday morning.
The RBNZ maintained its stance that the currency was overvalued, and said that a further significant depreciation would be "justified", especially given the low terms of trade.
"The main rationale for the OCR cut was falling dairy prices, which were heavily emphasized through the Monetary Policy Statement, and low actual inflation," Westpac chief economist Dominick Stephens said in a note on Thursday.
Dairy prices have fallen more than 50% from a peak in early 2014, drastically reducing dairy farmers' incomes and the terms of trade. The RBNZ projects that the drop in prices will wipe some $7 billion from the economy this season, representing a fall of about 3% of nominal GDP.
"At their current level, the terms of trade are dragging on growth, rather than boosting it," the bank's Monetary Policy Statement read.
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New Zealand - Business NZ manufacturing PMI for May: 51.5 (prior 51.8)
Business NZ manufacturing Purchasing Managers' Index (PMI) 51.5
The New Zealand Dollar stays weak after the decision from the RBNZ. The drop may continue, specially if the US fundamentals come out better than expected for this week.
The Kiwi stays consolidated just below the 0.7000 level. The pair may try to go lower, but if it breaks above the 0.7000 level, we could see a bullish correction.
New Zealand data - BoP Current Account Balance for Q1: 662 mln (expected 282mln)
New Zealand Q1 BoP Current Account dataBoP Current Account Balance for Q1, 662 mln
Current account to GDP ratio (YTD) for Q1, -3.6 %
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A much wider than expected kiwi current account surplus
More from Statistics New Zealand:
NZD/USD: Kiwi Swings to 5-Year Low Before GDP, Fed
The kiwi visited a new five-year low on Wednesday, as greenback bulls delivered support to the dollar ahead of the Federal Reserve (Fed) meeting outcome, while the Antipodean nation's GDP is expected to slow down in the first period.
The kiwi plunged 0.89% to $0.6920 against the greenback on Wednesday, its weakest level since July 2010.
The Reserve Bank of New Zealand (RBNZ) predicted in its quarterly Monetary Policy Statement last week that demand would begin to slow, owing to weaker dairy prices which have deteriorated the terms of trade, and softer consumption due to higher fuel prices.
These factors are likely to have played a part in slowing GDP growth in the first quarter to 0.6%, the RBNZ and most economists expect, from 0.8% in the December quarter.
The RBNZ cut its rates last week, with one of the key reasons behind the move the grim outlook for the domestic dairy sector.
On Tuesday, Fonterra's dairy auction showed the GDT price index fell 1.3%, after a previous loss of 4.3%, with an average dairy selling price of $2,409 per tonne.
Fed awaited
The Fed's two-day monetary policy meeting will conclude this afternoon, with the bank's policymakers set to present their fresh economic projections.
The central bank is unlikely to hike rates at this week's meeting, although there is still a slight possibility for the central bank to move rates. Lift-off at September's meeting is more likely to happen. Fresh economic projections will be released by the Fed and, of course, the tone of the statement will be closely eyed.
Moreover, Fed Chair Janet Yellen will be holding a press conference, where she may hint about when the bank plans to increase its interest rates. The market consensus is building in favor of a September rate hike.
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NZ Preview: Slowing Economy to Justify RBNZ's Early Move
New Zealand's solid economic run appears to be drawing to an end, economists say and figures due to be released this week might back this up, helping to explain why the Reserve Bank of New Zealand (RBNZ) preemptively acted to support demand when cutting the Official Cash Rate (OCR) last week.
The RBNZ predicted in its quarterly Monetary Policy Statement on Thursday that demand would begin to slow, owing to weaker dairy prices which have deteriorated the terms of trade, and softer consumption due to higher fuel prices.
These factors are likely to have played a part in slowing GDP growth in the first quarter to 0.6%, the RBNZ and most economists expect, from 0.8% in the December quarter, which would be New Zealand's weakest quarterly expansion in almost two years.
The amount of slack in the economy is continuing to keep inflation at very subdued levels, making it difficult for policymakers to just sit back and wait for inflation to reemerge.
"A reduction in the OCR is appropriate given low inflationary pressures and the expected weakening in demand, and to ensure that medium term inflation converges towards the middle of the target range," RBNZ Governor Graeme Wheeler explained on Thursday.
Inflation was last reported at just 0.1% in the March quarter, far below the RBNZ's 1-3% target range.
Still, the bank's decision to cut the OCR to 3.25% was somewhat unexpected, with less than half of economists polled before the decision predicting a cut, largely on the basis that the RBNZ had indicated it was waiting for evidence of slower demand before cutting, rather than cutting in anticipation of weaker demand.
Following the RBNZ's decision to cut on Thursday, most economists now expect a follow-up cut in either July or September.
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Westpac - Q1 GDP seals the case for a July Reserve Bank of New Zealand rate cut
Westpac response to the big miss for NZ Q1 GDP