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Home / Business

NZ dollar eases after brief spike on Government spending announcement

By Jenny Ruth
BusinessDesk·
11 Dec, 2019 04:07 AM3 mins to read

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The kiwi was trading at 65.23 US cents at 5pm. Photo / File

The kiwi was trading at 65.23 US cents at 5pm. Photo / File

The New Zealand dollar declined after a short-lived spike on news the government will spend $12 billion over five years on infrastructure.

The kiwi was trading at 65.23 US cents at 5pm in Wellington, after earlier spiking to 65.55 cents, from 65.39 at 8am. The trade-weighted index was at 72.11 points from 72.25.

See live rates for the NZ-US $ below. Click for more information:

​

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Despite the additional spending, Treasury is forecasting the economy will grow 2.2 per cent in the year ending June 2020, rising to 2.8 per cent the following year and slowing to 2.4 per cent in 2024.

In May, Treasury had been forecasting 2.4 per cent growth for 2020 and 3 per cent for 2021.

"I don't know why the market bought the currency – it was bizarre," said Tim Kelleher, head of foreign exchange sales at Commonwealth Bank of Australia. The budget policy statement "was exactly on expectations. There was no reason to be going and buying New Zealand dollars."

But the market had been trying to push the kiwi through 65.75 US cents since Friday night in New York and had failed a number of times.

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"So it's run out of momentum and we've seen a bit of a clean-out," Kelleher said.

The currency has had a strong run-up from 62.06 cents in early October.

Potential movers over the next few days include the Federal Reserve and European Central Bank's latest decisions on interest rates and Britain's general election. Polling stations there close at 11am Friday, New Zealand time.

While any of these events have the potential to push the New Zealand currency around, global markets are fixated on the December 15 deadline for tariffs to kick in on the remaining Chinese exports into the US unless those two nations reach some kind of deal.

"China is talking one thing and the US is saying another," Kelleher said. A deal "doesn't appear to have gotten any closer."

While China would like not only the December 15 tariffs removed but an easing of other tariffs, Washington is wanting Beijing to commit to massive purchases of US farm products.

The New Zealand dollar was at 95.72 Australian cents from 95.98, at 49.63 British pence from 49.58, at 58.80 euro cents from 58.95, at 70.91 yen from 71.09 yen and at 4.5897 Chinese yuan from 4.5987.

The two-year swap rate eased to a bid price of 1.2021 per cent from 1.2064 yesterday while 10-year swaps fell to 1.6500 per cent from 1.6550 per cent.

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