Dollar holds near 4-month low ahead of Reserve Bank rate review

The kiwi was unchanged at 70.13 US cents. Photo / 123RF

The New Zealand dollar held near a four-month low against the greenback as investors remain focused on Reserve Bank governor Adrian Orr's first monetary policy statement on Thursday.

The kiwi was unchanged at 70.13 US cents as at 5pm from 8am in Wellington, and down slightly from 70.16 cents yesterday. The trade-weighted index was at 73.38 from 73.34.

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Barring a sharp move in the US dollar, the kiwi is expected to stick to a tight range ahead of this week's rate decision. While the central bank is expected to keep the official cash rate at 1.75 per cent, the statement and the press conference will be watched closely as investors try to gauge what Orr will be like as governor.

"The balance of developments points to a slightly more hawkish statement than previously, but how and whether that will be articulated is uncertain given it's governor Orr's first MPS," said Westpac Banking Corp market strategist Imre Speizer.

The kiwi dipped briefly when the Reserve Bank's survey of expectations showed firms see the consumers price index reaching 1.8 per cent over the coming year, marginally lower than the 1.86 per cent pace predicted in the March quarter. Two-year ahead inflation expectations also declined to 2.01 per cent from 2.11 per cent, the midpoint of the central bank's 1-to-3 per cent target band.

The kiwi had a "small kneejerk response" to the fact that the headline number fell, said Speizer.

However, it may have gotten some relief from news China's trade balance returned to a surplus last month as external demand for Chinese products remained strong despite rising trade tensions with the US.

China posted a trade surplus of US$28.78 billion ($41b) in April, reversing a deficit of US$4.98b the previous month, the General Administration of Customs said Tuesday, according to Dow Jones Newswires.

The New Zealand dollar traded at 93.49 Australian cents from 93.34 cents yesterday after Australian retail sales were flat in March.

The kiwi dipped to 51.75 British pence from 51.81 pence yesterday and increased to 58.85 euro cents from 58.70 cents. It traded at 4.4636 Chinese yuan from 4.4617 yuan yesterday and decreased to 76.47 yen from 76.59 yen.

New Zealand's two-year swap rate rose 1 basis point to 2.27 per cent and 10-year swaps fell 1 basis points to 3.18 per cent.