NZ dollar treads water as Covid-19 cases spike in Melbourne

The kiwi was trading at 65.54 US cents at 5pm. Photo / File

The New Zealand dollar was little changed after volatile trading driven by swings in China's share market but could follow its Australian counterpart lower if the state of Victoria imposes a return to lockdown in greater Melbourne in response to spiking Covid-19 cases.

The kiwi was trading at 65.54 US cents at 5pm in Wellington from 65.50 cents at the same time yesterday while the trade-weighted index was at 72.21 from 72.31.

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The Reserve Bank of Australia released its latest monetary policy statement late today but it sparked little reaction.

"It was almost a carbon-copy of the previous one – no mention of the Australian dollar," said Tim Kelleher, head of foreign exchange sales at Commonwealth Bank of Australia.

"I'm surprised the (Australian) currency's still holding up despite what's happening in Victoria," Kelleher said.

Victoria reported a record 191 new cases of Covid-19 infection today and its premier, Daniel Andrews, is due to hold a media conference later today at which he is expected to announce further containment measures.

The border between Victoria and New South Wales has already closed.

News of coronavirus cases from the US remains grim with its new infection rate in the last 24 hours back above 50,000, but investors have been looking through that and focusing on better-than-expected economic data instead.

That includes data showing the US services sector, which accounts for 75 per cent of the economy, is growing again.

Meanwhile China's Shanghai Composite Index is up more than 1 per cent today after gaining 5.7 per cent yesterday.

The market ignored the quarterly survey of business opinion which showed New Zealand firms aren't expecting a pickup in economic activity anytime soon and many plan to further reduce staff.

"Firms have become even more cautious and have pared back on headcount and business investment," according to the latest survey from the New Zealand Institute of Economic Research.

A net 19 per cent of businesses reduced staff numbers in the June quarter, and a net 28 per cent expect to in the next quarter – the weakest reading since March 2009.

Kelleher said the market felt the QSBO failed to provide much in the way of forward-looking indicators, and that the ANZ monthly survey is regarded as more relevant at the moment.

The NZ dollar was trading at 94.04 Australian cents at 5pm from 94.06 cents at the same time yesterday, at 52.39 British pence from 52.40 pence, at 57.92 euro cents from 58.19 cents, at 70.35 yen from 70.51 yen and at 4.5948 Chinese yuan from 4.6129 yuan.

The bid price on the two-year swap rate was at 0.2100 per cent from 0.2080 per cent, while the 10-year swap was at 0.7575 per cent from 0.7700 per cent yesterday.