Dollar above 66USc again on profit-taking before interest rate decision
Kiwi rose to 66.32USc at 8am in Wellington, from 65.89USc at 5pm yesterday.
Hot Topic
Long reads
The New Zealand dollar rose as traders who had bet on the currency's decline took profits ahead of the Reserve Bank interest rate decision tomorrow.
The kiwi rose to 66.32USc at 8am in Wellington, from 65.89USc at 5pm yesterday. The trade-weighted index gained to 70.37 from 70.21 yesterday.
The Reserve Bank is expected to cut the official cash rate by 25 basis points tomorrow, with some saying there is an outside chance of a 50 basis point cut. Strong immigration data yesterday may have prompted some traders to pull back their bets on a 50 basis points cut. Those betting the currency would decline may have taken profits. Speculative investors are holding the biggest net short position in the New Zealand dollar on the Chicago Mercantile Exchange since the series began in 2003. A short position is a bet a currency will fall in value.
"It looks as though it's a bit of a short squeeze ahead of the OCR announcement tomorrow," said Peter Cavanaugh, client advisor at Bancorp Treasury Services. "Speculators are exceedingly short New Zealand dollars, so this is a chance to take a bit of profit.
"We have also seen a bit of US dollar weakness overnight, so the world had probably gone too far on the currency front and, with the substantial positioning against the New Zealand dollar, the rebound is exacerbated."
Bancorp's Mr Cavanaugh expects the Reserve Bank will reduce the benchmark by 25 basis points at tomorrow's review.
"It would seem more sensible and more central bank-like to do 25 now and lay the foundation and give guidance for a series of further 25 point cuts until the cash rate is at an appropriate stimulatory level," he said.
The focus today will be Australian second-quarter inflation and a speech by Reserve Bank of Australia governor Glenn Stevens in Sydney.
The New Zealand dollar slipped to 89.34Ac from 89.60Ac yesterday, fell to 60.64 euro cents from 60.91 cents, gained to 42.65 British pence from 42.34p, and advanced to ¥82.18 from ¥81.99.
(BusinessDesk)
Tina Morrison
Wed, 22 Jul 2015
Wed, 22 Jul 2015
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Dollar above 66USc again on profit-taking before interest rate decision
49752