NZ dollar rises as greenback declines after Yellen seen pushing back rate hikes
The New Zealand dollar rose, driven by weakness in the greenback after Federal Reserve chair Janet Yellen suggested the US central bank was in no hurry to raise interest rates.
The kiwi increased to 75.46 US cents at 8am in Wellington, from 75.29 cents at 5pm yesterday. The trade-weighted index was at 78.02 from 77.92 yesterday.
The dollar index, which measures the greenback against a basket of currencies, fell to 94.260 from 94.371 yesterday after the Fed's Yellen, in a second day of testimony to Congress, repeated the main points of her comments yesterday, suggesting the Fed won't need to raise interest rates for "at least the next couple of FOMC meetings." That prompted some investors to pull back their expectations for a hike.
"The US dollar continues to edge lower, reflecting the consensus that Fed Chair Yellen's testimony has pushed back the time at which the Fed begins to raise rates," Bank of New Zealand currency strategist Raiko Shareef said in a note. "The New Zealand dollar was more a follower than a leader."
Still, Shareef said he interpreted Yellen's comments as showing that Fed policymakers had more flexibility, rather than signalling a more dovish sentiment.
In New Zealand today, traders are awaiting a potential update to Fonterra Cooperative Group's forecast payout to farmers of $4.70 per kilogram of milksolids for the 2014/15 season, following a board meeting yesterday. Prices for whole milk powder, New Zealand's key dairy export, have jumped by about a third over the past two GlobalDairyTrade auctions.
An unchanged payout forecast should support the New Zealand dollar, with any upgrade likely to be modest, Shareef said. He expects any rallies to be capped at 76.10 US cents.
Trade and migration data scheduled for publication today are unlikely to push the kiwi higher, he said.
The New Zealand dollar was little changed at 95.59 Australian cents from 95.53 cents yesterday, at 66.44 euro cents from 66.33 cents and at 48.61 British pence from 48.65 pence. The local currency advanced to 89.75 yen from 89.38 yen yesterday.