WSJ:New Zealand Dollar High Late Ahead of German Ruling
By REBECCA HOWARD
WELLINGTON--The New Zealand dollar was trading higher late Wednesday as market participants await a German constitutional ruling likely later in the global day, as well as the outcomes of U.S. and New Zealand central bank policy meetings.
The kiwi remains "feisty" said Tim Kelleher, ASB Head of FX Institutional Sales New Zealand. He noted, however, "It's more a function of U.S. dollar selling than anything else today. It's just continuing along the same vein as the late London, New York session."
The New Zealand dollar was at US$0.8207 compared with US$0.8097 late Tuesday, having spent the day trading in a range of US$0.8170 to US$0.8213.
Market participants are awaiting a ruling from the German Federal Constitutional Court on the legality of the European Stability Mechanism. A ruling in favor of what is the European Union's permanent bailout fund is likely to lift the euro and, consequently, currencies more sensitive to risk such as the New Zealand dollar.
Next up is a U.S. Federal Reserve two-day policy meeting starting Wednesday, from which any new economic stimulus measures would likewise push up riskier currencies against the U.S. dollar.
Locally, market participants are awaiting the Reserve Bank of New Zealand's policy interest rate decision Thursday. The median of 14 economists surveyed by the Wall Street Journal suggests a 95% chance that outgoing Gov. Alan Bollard will keep the cash rate on hold, with a 5% chance of an economy-boosting cut.
Even so, Mr. Bollard "might have a few words of discouragement," said Mr. Kelleher.
Concern about the adverse external environment has cemented the view that the central bank won't start raising its rate until the middle of 2013, although two economists see the rate on hold until 2014.
Government bonds ended slightly weaker Wednesday but a local bond trader said the market is treading water ahead of the German ruling and Fed meeting, with some interest in the RBNZ decision.
