NZ dollar little changed after Reserve Bank comments erase gains

The kiwi was trading at 64.60 US cents at 5pm. Photo / File

The New Zealand dollar was little changed after the Reserve Bank's mention of the elevated currency putting pressure on export earnings punctured earlier gains on the back of stronger US equities.

The kiwi was trading at 64.60 US cents at 5pm in Wellington compared with 64.71 cents at the same time yesterday.

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But it had reached a high overnight at 65.35 US cents and had pulled back to 65.10 cents just before the RBNZ released its latest decision on monetary policy. Immediately afterwards, it dropped as low as 64.50 US cents.

The central bank left its policy settings unchanged, keeping the official cash rate at 0.25 per cent and maintaining its money printing programme, known as quantitative easing, at $60 billion. It said it might have to do more to support the local economy.

The RBNZ's press release contained a single line about the currency: "The appreciation of New Zealand's exchange rate has placed further pressure on export earnings."

And the minutes of its monetary policy committee's meeting similarly contained a single sentence about the currency: "Members also noted that the exchange rate has appreciated since the May statement, dampening the outlook for inflation and reducing returns for New Zealand exports."

Tim Kelleher, head of foreign exchange sales at Commonwealth Bank of Australia, said he'd thought the RBNZ statement was "benign – they just said the currency appreciation wasn't helping."

The market reaction "just goes to show the market was long going into it," he said.

With the monetary policy statement out of the way, there's little else on the horizon but what happens to equities, Kelleher said.

"We just wash around with the machinations of equities."

While NZ and Australian share markets are higher, major markets in Asia and US futures are little changed. That was after a number of tech stocks and the tech-heavy Nasdaq index hit record highs on Tuesday.

However, investors are also keeping a wary eye on the explosion of coronavirus infections in some US states. The country as a whole recorded its third worst day for new infections at 36,015 on Tuesday since the numbers started to be reported in early March.

A number of states including California, Texas and Arizona, have reported steeply rising infection rates.

The New Zealand dollar traded at 93.07 Australian cents from 93.59 at 5pm yesterday, at 51.62 British pence from 51.87 pence, at 57.11 euro cents from 57.45 cents, at 68.84 yen from 69.34 yen and at 4.5664 Chinese yuan from 4.5781 yuan.

The trade-weighted index was at 71.35 from 71.65 in late domestic trading yesterday.

The bid price on the two-year swap was at 0.1975 per cent from 0.2225 per cent, while the 10-year swap was at 0.7500 per cent from 0.7275 per cent yesterday.