Kiwi falls against pound on split BOE over rate hike, drops against greenback

The New Zealand dollar declined against the pound after the Bank of England policy committee kept rates on hold but with a split vote, while it fell against the US dollar in the wake of yesterday Federal Reserve statement that kept intact plans for another rate hike this year.

The kiwi fell to 56.46 British pence as at 8am in Wellington from 56.64 pence late yesterday. It traded at 72.02 US cents, having touched 71.83 cents overnight, from 72.22 cents yesterday.

The pound rose after the BOE kept its key rate unchanged at 0.25 percent as expected but it emerged that as many as three policy committee members had voted to raise interest rates. In the US, investors are mulling the Fed's statement, which projected further rate hikes and plans to start unwinding the central bank's enormous balance sheet, while appearing to downplay weaker-than-expected inflation data. The kiwi is also under pressure following first-quarter economic growth figures yesterday that showed the economy is growing slower than expected.

"This week's run of softer data will doubtless dent the NZD's shiny armour, but while disappointing, the data were only relatively minor misses, and in level terms, New Zealand's economic credentials remain sound," said David Croy, senior rates strategist at ANZ Bank New Zealand, in a note. "The Fed is optimistic that it will continue raising rates, and that is likely to lend the USD support should they be correct in that assessment."

The pound surged when the BOE vote tally revealed "that 3 of the 8 MPC members voted for a hike," he said.

The kiwi edged up to 95.07 Australian cents from 94.88 cents yesterday, when figures showed the Australian economy added 42,000 jobs in May, four times as many as expected, while the jobless rate came in lower than expected at 5.5 percent.

Locally traders will be watching for the May manufacturing PMI report out this morning. While gross domestic product grew a lower-than-expected 0.5 percent in the first quarter, manufacturing production rose 1 percent and was 2.1 percent higher than a year earlier, with transport equipment, machinery and equipment manufacturing the biggest contributor to the sector.

The trade-weighted index rose to 77.58 from 77.48 yesterday. The kiwi fell to 4.9058 yuan from 4.9063 yuan, rose to 79.94 yen from 79.16 yen and rose to 64.62 euro cents from 64.36 cents.

(BusinessDesk)