Kiwi slumps on likely US rate hike

The New Zealand dollar traded at A93.12c from A93.18c. Photo / File
The New Zealand dollar traded at A93.12c from A93.18c. Photo / File

The New Zealand dollar is headed into the end of the week down 2.1 per cent against the greenback and down 1.4 per cent on a trade-weighted index basis as the market is now firmly of the view the US Federal Reserve will lift rates in mid-March.

The kiwi dollar fell to US70.37c as at 5pm yesterday from US70.54c as at 8am and US71.33c late on Thursday. It opened the week at US71.90c. The TWI fell to 77.15 from 78.23 at the beginning of the week and 77.90 late on Thursday.

ANZ Bank New Zealand senior economist Philip Borkin said the market was initially uncertain about whether the Fed would move this month but after solid data and a raft of Fed speakers "all singing from the same song sheet", it is now pricing in a 90 per cent chance of a rate hike.

Fed governor Lael Brainard, New York Fed president William Dudley and San Francisco Fed president John Williams have all indicated a rate hike is possible recently and the fact that "markets have embraced that" makes it even easier for the Fed to move, Borkin said.

Investors were focused on a speech to be made by Fed chair Janet Yellen later in the global trading day but she was expected to also signal that March is live, he said. Borkin noted there was little movement against other currencies such as the Australian dollar.

"It's really a US dollar story."

The New Zealand dollar traded at A93.12c from A93.18c. The local currency was at 57.33 British pence versus 58.10p and at 66.86c compared with 67.73c. It was at 80.32 from 81.28 and 4.8541 yuan from 4.9096 yuan.

The two-year swap rate was unchanged at 2.30 per cent and 10-year swaps were unchanged a 3.49 per cent.BusinessDesk

- BusinessDesk

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