NZ dollar steadies

New Zealand dollar 2The New Zealand dollar held below US73c on Monday amid growing expectations the US Federal Reserve will hike rates more aggressively this year after solid jobs data.

That is in contrast to the Reserve Bank which will likely reiterate it won’t raise rates anytime soon.

The kiwi traded at US72.91c as at 5pm in Wellington versus US72.92c as at 8am in Wellington and 73.01c on Friday in New York.

The greenback got a boost when the US non-farm payrolls report showed wages growing at their fastest pace in more than eight-and-a-half years, leading futures markets to price in the risk of three or even more rate rises from the Federal Reserve this year as inflation expectations were stoked.

At the same time, New Zealand’s Reserve Bank is tipped to keep the official cash rate unchanged and retain a flat outlook at this Thursday’s review.

Sheldon Slabbert, a trader at CMC Markets, said the greenback was back in favour “as the Fed clearly will be raising rates in March” while New Zealand’s rate outlook will weigh on the kiwi in the short term due to the narrowing rate differential, he said.

New Zealand’s OCR at 1.75 per cent compares to the fed funds rate target range of 1.25-to-1.5 per cent

The Reserve Bank’s first monetary policy review of the year on Thursday will be key for markets, he said.

Inflation is “still benign and the housing market is slowing,” he said. “They don’t have too much ammunition to be too hawkish.”

Data from Barfoot Thompson added to the view the heat is coming out of the housing market. According to the realtor, the number of houses sold in Auckland fell 5.7 per cent in January from a year earlier.

Markets are closed Tuesday for the Waitangi Day public holiday.

The local currency traded at 80.16 yen from 80.42 yen on Friday in New York and at A91.94c from 92.08c. It traded at 58.52 euro cents from 58.58c and was almost unchanged at 51.64 British pence from 51.69 pence last week. The kiwi fell to 4.5914 Chinese yuan from 4.5991 yuan.

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