NZ dollar little changed in tight range ahead of Fed

Lucy Hill
March 18, 2017

The results of the Dutch election and the Federal Reserve's policy meeting also weighed on investors' minds. It hit a five-week low on Thursday, and is down nearly 1 percent for the week.

The common currency was boosted as exit polls showed the Netherlands' centre-right Prime Minister Mark Rutte roundly saw off a challenge by anti-Islam, anti-EU Geert Wilders in an election on Wednesday, alleviating concerns towards Holland opting to leave the EU. "We could see the euro gain further if spreads between French and German government bonds tighten today".

London's benchmark FTSE 100 index of major blue-chip companies added 0.2 per cent to 7,370.71 points.

It slid more than 1 percent the previous day to touch 100.490, its lowest since February 17.

Some traders had begin to suspect it would raise rates four times this year as the economy builds up steam.

It's the counterintuitive move of "buy the rumour, sell the news" that had investors out of the US dollar following the Fed Wednesday.

Against its Japanese counterpart, the greenback edged down 0.1 percent to 114.67, shy of last week's high of 115.51, which was its highest level since January 19 as expectations built for the rate increase.

However, with a slew of strong U.S. data in recent months having already been baked into prices, a global market has eased up in March, dented by concerns about Donald Trump's lack of movement on his promises to ramp up infrastructure spending and cut taxes. "The dot plot was left mostly unchanged, shaking out expectations among dollar bulls that had gone too far", said Koji Fukaya, president of FPG Securities in Tokyo.

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Andrew Polk, Beijing-based head of China research at Medley Global Advisors, said: "Moving in line with the Fed also shows that China is still essentially importing United States monetary policy, despite increased capital controls over the past several months".

The focus is now on BOJ Governor Haruhiko Kuroda's post-meeting briefing at 0630 GMT for clues on the central bank's stance on whether and when to pull back its massive stimulus programme. The Fed's two day policy meeting ends on Wednesday, and may be followed by a series of short term rate hikes this year.

The Chinese yuan weakened to 6.87 per dollar, after strengthening to 6.8455 after the Fed's policy decision.

In early European trade London climbed 0.7 percent, Paris added 0.8 percent and Frankfurt soared 1.2 percent.

Sterling inched lower to $1.2351.

Seoul advanced 0.8 percent, Sydney ticked up 0.2 percent and Singapore was 0.8 percent higher, while there were also big gains in Wellington, Taipei, Jakarta and Manila.

"While we wouldn't want to overplay how weak the data was (amid signs of temporary weather distortions), they do nonetheless underscore the Reserve Bank's view that time is on its side, especially given the myriad of global uncertainties and recent moves higher in retail interest rates, which is a de facto tightening", said David Croy, senior rates strategist at ANZ Bank New Zealand.

Other reports by TheDailyFarc

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