You are here
Dollar off lows, kiwi rallies on less dovish central bank stance
[TOKYO] The dollar crawled off one-week lows against the yen in early trading on Thursday, while the New Zealand dollar rallied after the central bank there made a smaller cut to interest rates than some had expected.
The kiwi dollar climbed to a peak of US$0.6654, from US$0.6570 before the central bank rate policy decision, and was last up 0.8 per cent on the day at US$0.6629, moving away from a six-year low of US$0.6498 plumbed on July 14.
The Reserve Bank of New Zealand (RBNZ) trimmed rates by 25 basis points, while some investors had expected a more aggressive 50-basis-point cut to counter growing economic headwinds. "The (RBNZ) statement erred to the less dovish end of the spectrum and did not commit to a follow-up cut in September,"said RBC currency strategist Michael Turner in a note to clients.
Mr Turner said the central bank's statement also toned down its rhetoric on the kiwi, from earlier calls for further"significant downward adjustment" to now saying that a "further depreciation is necessary".
The dollar edged up about 0.1 per cent against the yen to 124.11 yen, moving away from a one-week low of 123.57 yen touched in the previous session.
The euro inched down 0.1 per cent to US$1.0922, back toward a three-month low of US$1.0808 set on Monday.
The dollar index, which tracks the greenback against a basket of major currencies, stood 97.479. It fell as low as 97.108 in the previous session before taking back lost ground.
US data on Wednesday showed new home resales rose to a 8-1/2 year high, bolstering bets that the Federal Reserve is on track to hike interest rates later this year. The prospect of higher rates enhanced the dollar's appeal, and propelled it to session highs.
The British pound also got a lift from the prospect of higher interest rates, and was up slightly on the day at US$1.5624 .
Minutes from the Bank of England's July 8 meeting revealed on Wednesday that several policymakers are moving towards voting for the first rate increase following BOE Governor Mark Carney's recent comments that a hike might happen around the end of year.
Economists predicted that three of nine members of the BoE's Monetary Policy Committee might vote for a rate hike in August, which could put the central on track for a majority to back an increase later this year or in early 2016.