Kiwi dollar drifts lower as RBNZ policy decision looms
- The kiwi fell 0.4% to $0.5687, after climbing 1.3% last week to as high as $0.5727
SYDNEY: The New Zealand dollar slipped on Monday after solid weekly gains, with much now riding on whether the central bank will make its first rate hike in over three years when it meets mid-week.
The kiwi fell 0.4% to $0.5687, after climbing 1.3% last week to as high as $0.5727. It broke key support at the 14-day moving average at $0.5690 but remained well above a seven-month trough of $0.5627.
Two-year swap rates fell 4 basis points to 3.33% on Monday, having risen 6 bps last week. The Reserve Bank of New Zealand meets on Wednesday where a rise in the current 2.25% cash rate is widely expected.
Markets are 75% priced for a move after the board delivered a hawkish hold in May with three of the board members voting for a hike.
A Reuters poll showed 22 out of 28 economists tipped a hike, but a nine-person shadow board assembled by the New Zealand Institute of Economic Research of mostly local economists and business leaders recommended the RBNZ hold rates steady after a split of views.
“It’s finely balanced, but I would prefer to hold at 2.25% in July,” said Kerry Gupwell, chief executive at Boffa Miskell, who is on NZIER’s shadow board.
“Inflation risk is real, but activity and confidence still feel uneven, and the fuel shock may be easing.
If wages, margins or expectations firm from here, I’d support a measured increase soon.“
Analysts at ANZ said there is less urgency for the RBNZ to hike now given the slide in oil prices, but they still expect a hike, arguing that if the central bank does not deliver on its hawkish bias, it may lead to an easing in monetary conditions.
The Aussie eased 0.1% to $0.6929, having climbed 0.7% last week to end a four-week losing streak.
Support is around the three-month low of $0.6867, while resistance is around $0.6979.
It also climbed 0.3% versus the kiwi to NZ$1.2178.
Sarah Hunter, an assistant governor at the Reserve Bank of Australia, will give a speech in Canberra on Wednesday.
Markets are wagering the RBA is mostly done hiking after three rate rises this year to 4.35%, with just 10 basis points of tightening priced in for the rest of the year.
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