NZ dollar treads water ahead of NZ poll, Fed meeting

The Australian and New Zealand dollars pushed lower, with AUD/USD down 1.31% at 0.7926 and with NZD/USD dropping 0.71% to 0.7306. But with employment remaining healthy and inflation being so close to its target, the Fed may get the market ready for another rate rise in December and also provide a plan for balance sheet normalisation.

The euro rose 0.1 percent to $1.2004 EUR= while the yen rose 0.3 percent to 111.24 per dollar.

The dollar was steady versus the yen and against a basket a currencies early on Wednesday.

Investors are now preparing for potentially more hawkish statements from the Federal Reserve after its two-day policy meeting this week, following the Bank of England’s unexpected talk last week of a possible rate hike surprising investors. “The quiet nature of (the market) is in anticipation of the Fed meeting”.

Treasury yields were steady on Wednesday as traders awaited the Federal Reserve’s policy meeting decision, which is expected to begin a historic wind-down of the central bank’s $4.5 trillion balance sheet.

The euro recovered ground against the dollar to trade 0.1 percent higher at $1.1903 after a four-session wining run had come to an end with the previous day’s 0.8 percent fall. No change in interest rates was expected from the Fed, but some hints as to the chances of another hike this year as well as an update of the terminal rate when the hiking process finishes, are expected.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.2 percent.

“North Korea poses such a binary risk that it’s very hard to price, and at the moment investors just have to look through it”, said Mike Bell, global market strategist at JP Morgan Asset Management.

On the mainland, the Shanghai Composite was up 0.28% at 3,366.37, and the smaller, technology-heavy Shenzhen Composite added 0.83% to 2,012.23.

The dollar was steady at 112.445 yen and on track to end 1.4 percent higher on the week, during which it brushed a two-month high of 112.725 as United States yields spiked on the back of the Fed’s hawkish stance.

“We continue to expect that the ongoing strength of the economy will warrant gradual increases in that rate to sustain a healthy labor market and stabilize inflation around our 2 percent longer-run objective”, Chair Janet Yellen said during a press conference. Meantime, Nymex crude oil futures are higher this morning.

OIL: Benchmark U.S. crude added 35 cents to $50.25 per barrel on the New York Mercantile Exchange.

The kiwi jumped half a USA cent after the 1News Colmar Brunton poll yesterday showed the National Party leapfrogged its rival Labour Party, with 46 percent support to 37 percent.

Brent crude futures last stood at $55.83, down around one per cent from late USA levels as United States benchmark West Texas Intermediate (WTI) fell to $50.14.

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