WSJ:New Zealand Dollar Higher Late On Rising Hopes For US Easing
WELLINGTON--The New Zealand dollar was trading higher late Monday on rising hopes for stimulus measures from the U.S. Federal Reserve following Friday's weaker-than-expected U.S. jobs data.
"There is a risk-positive backdrop," said WBC.AU -0.42% Westpac Bank Senior Strategist Imre Speizer. He noted that the pair lost some ground after China announced that its trade surplus widened in August as imports fell unexpectedly. He said, however, it was cushioned somewhat by news that its iron ore imports rose 7.9% from July.
"It's a weak number, but there are mitigating factors and one of them was iron ore," said Mr. Speizer.
He said the focus is now on the U.S. Federal Reserve and whether it will launch a third round of quantitative easing, known as QE3, at its two-day policy meeting later in the week.
He expects the market to largely overlook the Reserve Bank of New Zealand's cash rate decision Thursday as the central bank is widely expected to remain on hold.
Mr. Speizer said Westpac's model indicated that little has changed to alter the central bank's on-hold stance. "In fact, very unusually, there is exactly zero difference since the last meeting," in terms of where interest rates should be.
The high New Zealand dollar continued to take its toll on the export sector. Earlier Monday, the New Zealand Manufacturers and Exporters Association said the "overvalued exchange rate" has cost exporters NZ$10.4 billion over the past three and a half years. It noted that the New Zealand dollar touched 52.3 on a Trade Weighted Index in February 2009 and rose to 72.9 in August this year. It is currently at 72.45.
"For every 1.0% the currency rises, it costs New Zealand exporters approximately NZ$200 million on an annual basis," the NZMEA said.
Government bonds ended higher but a local bond trader said volumes were light with the main focus on the FOMC and the RBNZ.
