Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

New Zealand dollar set for biggest jump this year on central bank surprise

Published 11/13/2019, 03:58 AM
Updated 11/13/2019, 03:58 AM
© Reuters. FILE PHOTO: Illustration photo of a New Zealand Dollar note

LONDON (Reuters) - The New Zealand dollar provided the standout performance in otherwise unremarkable currency markets on Wednesday as it stood set to notch its biggest daily gain in a year after the central bank stunned investors by keeping interest rates on hold.

Hedge funds and banks had built up massive short positions in the kiwi as the local dollar is known before the rate decision on bets that a protracted trade war between Washington and Beijing would hurt the export-oriented economy's prospects.

But after two rate cuts this year, the Reserve Bank of New Zealand said it saw no urgency to ease policy again, sending the dollar up by more than 1% and short-dated bond yields and swap rates surging higher.

"Like much of the market, we had expected an RBNZ cut today," UBS strategists said in a daily note.

"Signs of progress in U.S.-China trade talks have soothed global markets and policymakers alike," they said expecting the local dollar to strengthen to $0.63 by end-2019.

Against a broadly firm greenback, the kiwi was up 1.3% at $0.6407, comfortably on track for its biggest daily jump since end-October 2018.

Almost all analysts had forecast a cut in the 1% benchmark rate to a record-low 0.75%. Futures markets had priced in a better-than-75% chance of a cut as slack spending and a global slowdown held New Zealand's economic growth at a six-year low.

Elsewhere, the U.S. dollar remained broadly firm against a basket of its rivals (DXY) as weak risk appetite, partly due to the intensifying unrest in Hong Kong, raised the greenback's safe haven appeal.

It edged 0.1% higher at 98.41, holding just below a one-month high of 98.423 hit in the previous session, with market focus turning towards a two-day testimony by U.S. Federal Reserve chief Jerome Powell later in the day.

The British pound remained broadly steady around the $1.2840 line as latest opinion polls forecast a lead for the ruling Conservative Party.

© Reuters. FILE PHOTO: Illustration photo of a New Zealand Dollar note

(GRAPHIC: NZ dollar -

Latest comments

suprise? rbnzd is one of the top central banks in the world did easily short gbp/nzd and eur/nzd just as i know why should nzd cut rates? no reason no nothing happend only my account grows thanks
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.