Reserve Bank governor Graeme Wheeler’s comments about a further OCR cut and devaluation of the currency were not surprising, NBR reporter Jason Walls says.
“The market has already priced in a September cut,” he says adding the question is not if the Reserve Bank will cut but rather by how much.
Westpac senior market strategist Imre Speizer says Mr Wheeler’s speech was not as dovish as many analysts thought it would be.
He says Mr Wheeler’s comments indicated there is another OCR cut coming in September but, beyond that, “don’t expect anything.”
“It’s clear he wanted the currency to go lower, and wants interest rates to stick where they are. I don’t think that’s possible.”
Mr Wheeler said in his speech last week that given the weakness in export commodity prices, “further exchange rate depreciation is necessary.”
Mr Speizer forecasts the New Zealand dollar to be at roughly 62c against the US by the end of the year.
Messrs Walls and Speizer agree that one of the biggest factors in the value of the New Zealand dollar against the US is what the US Federal Reserve will do with its rates come September.
Mr Walls says a big pointer to what will happen in September will be the employment numbers coming out at the end of next week.
“US Fed chairwoman Janet Yellen has constantly reiterated that a rate hike is dependent on inflation, and unemployment numbers.
“Unemployment has been steadily dropping this year, and is now at 5.3%, which is in the Fed’s band of full employment.”
NBR Radio
Mon, 03 Aug 2015
Mon, 03 Aug 2015
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Market Talk - Currency: Wheeler's comments about the currency and where the dollar will be in six months
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