NZ dollar little changed near 4-week low

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The New Zealand dollar was little changed near a four-week low following New York Fed President William Dudley's comment that the US central bank wouldn't need to delay rate hikes much in order to shrink its balance sheet.

The kiwi traded at 69.36 US cents as at 5pm in Wellington from 69.34 cents in late New York trading on Friday, when it fell as low as 69.26 cents, the lowest since March 15. The trade-weighted index declined to 75.84 from 77.

Dudley clarified earlier comments about a pause in the rate hike cycle to reduce the bank's US$4.5 trillion (NZ$6.5t) balance sheet, which some traders had read more into than the "little pause" he had meant. The market is now pricing in a 64.4 per cent chance of a hike at the Fed's June meeting, above the threshold of about 60 per cent that the Fed likes to see in the weeks leading up to a policy meeting. The market didn't react much to US non-farm payrolls showing the US economy added a smaller-than-expected 98,000 jobs last month.

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"Dudley probably clarified previous comments that were arguably misinterpreted," said Mark Johnson, senior dealer at OMF. "The US dollar trajectory looks more positive." By contrast, the kiwi "has been becalmed", he said.

While milk powder prices have recovered in recent GlobalDairyTrade auctions, traders are now considering the severe wet weather that hit the central North Island with "the perception or fear it will affect the start to the new season, given it is already wet underfoot," Johnson said. "If that's the case it's going to be difficult to sow and grow heading into the winter months."

With little significant economic data due out in New Zealand this week, the next significant release will be the consumers price index for the first quarter, due for release on April 20 and expected to show inflation accelerated to about 0.75 per cent in the quarter from 0.4 per cent three months earlier.

The kiwi rose to 77.30 yen from 77 yen late on Friday in New York and gained to 92.62 Australian cents from 92.40 cents. It traded at 65.52 euro cents from 65.46 cents and traded at 56 British pence from 56.03 pence. The kiwi increased to 4.7885 yuan from 4.7829 yuan.

New Zealand's two-year swap rose 4 basis points to 2.27 per cent, and 10-year swaps gained 6 basis point to 3.32 per cent.