NZ dollar heads for 2.1% weekly gain, propped up by uncertainty over RBNZ review

The New Zealand dollar is heading for a 2.1 percent gain this week as uncertainty over whether the Reserve Bank will cut rates next week provides support for the local currency.

The kiwi rose to 66.84 US cents at 5pm in Wellington from 65.30 cents on Friday in New York last week. It traded at 66.55 cents at 8am and 66.46 cents yesterday. The trade-weighted index was little changed at 72.24 from 72.29 yesterday, and is heading for a 0.9 percent gain this week.

A BusinessDesk survey of 10 currency analysts this week predicted the kiwi would trade between 63.50 US cents and 67.50 cents this week. Six expected it to decline, two said it would rise, and and two bet it would stay largely unchanged.

The kiwi has been bolstered by a fairly split market on whether Reserve Bank governor Graeme Wheeler plans to cut the 2.75 percent official cash rate next Thursday, a week before the Federal Reserve reviews policy which will likely see the first rise in US interest rates since they were cut to near zero at the end of 2008. Upcoming US non-farm payrolls data will be closely watched by investors and inform their expectations on whether the Fed will hike.

"The RBNZ will be the key event for the week, given it's currently priced 50/50, which currency market makers will expect some volatility on, so all eyes on the New Zealand dollar next week," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand. "That uncertainty is helping the kiwi remain stronger."

New Zealand's two-year swap rate increased one basis point to 2.73 percent at 5pm in Wellington, and the 10-year swap climbed nine basis points to 3.61 percent.

The kiwi dropped to 61.15 euro cents from 62.72 cents yesterday after the European Central Bank's stimulus package disappointed market expectations. The local currency declined to 44.19 British pence from 44.51 pence yesterday, and was little changed at 81.94 yen from 81.96 yen. It rose to 91.27 Australian cents from 90.98 cents yesterday, and advanced to 4.2746 Chinese yuan from 4.2512 yuan.

(BusinessDesk)