The New Zealand dollar is in for a quiet start to the week as traders look ahead to the looming Reserve Bank decision on interest rates on Thursday where a hike is expected.
The kiwi traded at 86.85 US cents at 8am in Wellington, from 86.97 cents at the New York close and 86.77 cents at 5pm in Wellington on Friday. The trade-weighted index was little changed at 80.86 from 80.84 on Friday.
Reserve Bank governor Graeme Wheeler is expected to hike the official cash rate for the fourth time this year, taking the benchmark to 3.5 per cent. The higher interest rates available in New Zealand, along with its stable government and strong credit rating, has lured overseas investors and pushed up the local currency 6 per cent so far this year. Still, weaker commodity prices and benign inflation may prompt the central bank to pause until December after this month's hike, economists say.
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"Domestically, this week will be all about Thursday's RBNZ meeting," Kymberly Martin, senior market strategist at Bank of New Zealand, said in a note. "The market currently prices around an 85 per cent chance of a 25 basis point hike at the meeting."