NZ dollar falls against strengthening US dollar

  • 14/04/2016

The New Zealand dollar fell against a broadly stronger US dollar and after the Monetary Authority of Singapore eased policy in a move seen as signalling weaker global growth.

The kiwi dropped to 68.44 US cents at 5pm in Wellington, from 69.39 cents late on Wednesday. The trade-weighted index fell to 72.37 from 73.

The US dollar index, which measures the greenback against a basket of currencies, has picked up from a six-month low this week on speculation the currency may have sold off enough given the Federal Reserve is planning to raise interest rates at some stage.

The kiwi dropped further on Thursday after the central bank of Singapore, MAS, which drives monetary policy decisions via the Singapore dollar, eased policy for the third time in 15 months to 'neutral', sending a signal to financial markets that the city-state sees a dimmer outlook for its own economy and global growth.

"Singapore is saying there's a less favourable external environment, a general feeling that global trade is going to be a bit weaker than expected this year," said Dan Bell, head of corporate sales at HiFX.

"The reasons for wanting to buy the kiwi or sell the US dollar are looking less compelling. The bottom line is that the Reserve Bank of New Zealand is easing and the Fed is going to be tightening and it is just a question of timing."

The kiwi didn't move much after the release of the BNZ-BusinessNZ performance of manufacturing index, which fell to a seasonally adjusted 54.7 last month, a five-month low.

Traders are relatively evenly split on the timing of an interest rate cut by the Reserve Bank, with about 49.7 per cent seeing a cut in the official cash rate to 2 per cent on April 28 and 50.3 per cent seeing the rate remaining at 2.25 per cent, making a cut in June more likely, based on the overnight interest swap curve.

The New Zealand dollar fell to 89.35 Australian cents from 90.11 cents yesterday and declined to 60.73 euro cents from 61.05 cents. It slipped to 4.4359 yuan from 4.4852 yuan, and fell to 48.44 British pence from 48.65 pence. The kiwi traded at 74.82 yen, down from 75.55 yen.

The two-year swap rate fell 3 basis points to 2.21 per cent and the 10-year swaps dropped 4 basis points to 2.95 per cent.