Currency talk: NZ dollar takes stock before Fed call
Jason Walls and ANZ's Sam Tuck discuss the global currency market news on NBR Radio and on demand on MyNBR Radio.
Click the NBR Radio box for on-demand special feature audio: Jason Walls and ANZ's Sam Tuck discuss the global currency market news
All investment eyes will be on how the NZ dollar reacts to the US Federal Reserve hiking rates this week.
The kiwi has already risen against the greenback since the Reserve Bank cut the official cash rate last week.
Market pricing for a rate hike in the US is roughly 75% and most analysts following the Fed agree interest rates will be hiked by 25 basis points come December 16.
ANZ senior FX strategist Sam Tuck says that, at this stage, a hike is pretty much a done deal.
“It’s almost going to create more volatility if the Fed does not raise the rate, as a hike is the expectation,” he says.
However, since a hike in interest rates has already been factored in to the kiwi/US cross rate, there is a possibility the New Zealand dollar won’t drop as markedly as has been expected.
How low the kiwi dollar goes depends heavily on the forward guidance that Fed chairwoman Janet Yellen gives.
If she is more hawkish, then it’s expected the kiwi will weaken against the US. A more dovish statement would have the opposite effect.
Mr Tuck says the market is pricing in another three hikes in 2016.
“There is every possibility there could be a counterintuitive currency reaction to this event. But the long-term outlook is still for US dollar strength in 2016.”
Use MyNBR Tags to track people and companies – and receive key-word email alerts. Find out how here.
NBR Radio
Tue, 15 Dec 2015
Tue, 15 Dec 2015
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Currency talk: NZ dollar takes stock before Fed call
54358