"It's chopped around within a range. People are really waiting for Jackson Hole," said ANZ Bank New Zealand senior economist Phil Borkin. Tensions on the Korean peninsula are also hovering in the background as South Korean forces began computer-simulated military exercises with the United States on Monday, which Pyongyang has denounced as a "reckless" step toward a nuclear war, Borkin said.
Stuart Ive, OMF private client adviser, agreed. "Markets await direction likely to come from Jackson hole at the end of the week assuming North Korean relations do not deteriorate further," he said.
Borkin said one factor that is likely to keep the kiwi capped is the upcoming September 23 election as "it is quite clear the election is going to be very close" and there is a "decent chance we see a change in government" as the polls are now showing a tight race.
He doesn't expect the economic backdrop to change, however, regardless of who wins. "When all is said and done the fiscal accounts will still look very healthy," he said. However, the uncertainty will likely keep the kiwi from pushing too much higher. The government will unveil the state of the books tomorrow in the pre-election fiscal and economic update.
The kiwi traded fell to 62.04 euro cents from 62.25 cents yesterday and traded at 56.84 British pence from 56.81 pence. It dropped to 4.8755 yuan from 4.8798 yuan and edged up to 80.03 yen from 79.89 yen. The kiwi was little changed at 92.28 Australian cents from 92.30 cents.
New Zealand's two-year swap rate was unchanged at 2.17 per cent while 10-year swaps fell 1 basis points to 3.13 per cent.
