Dollar holds steady as Financial Stability Report awaited

The New Zealand dollar was little changed as investors await an update on the Reserve Bank's view of Auckland's bubbling housing market as part of its Financial Stability Report this morning.

The kiwi was at 73.63 US cents at 8am in Wellington, from 73.60 cents at 5pm yesterday. The trade-weighted index slipped to 75.98 from 76.17 yesterday.

Traders will scour the latest financial stability report for signs of any further action the central bank could take to introduce further lending restrictions in an attempt to curb rising house prices in New Zealand's largest city. The bank is concerned the heated housing market could cause financial instability but has taken interest rate hikes off the table as it eyes weak inflation and falling prices for dairy products, New Zealand's largest export commodity.

"All eyes will be on the RBNZ Financial Stability Report this morning," ANZ Bank New Zealand senior rates strategist David Croy and senior FX strategist Sam Tuck said in a note. "Markets are looking for continued progress toward further macro-prudential policies, and may be disappointed if none is forthcoming."

The six-monthly report will be released at 9am, with Reserve Bank governor Graeme Wheeler and deputy governor Grant Spencer scheduled to front a media conference. Wheeler, Spencer and Bernard Hodgetts, head of the bank's macro financial department, will later appear before parliament's finance and expenditure committee at 1pm.

ANZ expects the kiwi to trade between 73 US cents and 74.40 cents today.

Statistics New Zealand will publish April food price data at 10:45am.

Later today, the focus will be on Chinese data on industrial production, retail sales and fixed asset investment data for April, as investors gauge how New Zealand's largest trading partner is tracking. China reduced interest rates this week to stimulate the slowing economy.

The New Zealand dollar fell to 92.18 Australian cents from 92.81 cents yesterday, touching a five-month low of 92.06 cents overnight. The Aussie strengthened following the Australian budget yesterday, which forecast a better-than-expected surplus next year.

The kiwi touched a fresh four-year low of 46.86 British pence and was trading at 46.97 this morning from 47.24 yesterday after better-than-expected UK March industrial production data. The Bank of England today publishes its latest quarterly inflation report, and BoE governor Mark Carney will release the latest growth, inflation and unemployment forecasts.

The local currency slipped to 65.64 euro cents from 65.88 cents yesterday as negotiations continue between Greece and Eurozone finance ministers. The kiwi declined to 88.23 yen from 88.46 yen yesterday.

(BusinessDesk)