NZ dollar slips back to about 70 US cents

This week the Reserve Bank is expected to reiterate it won't raise interest rates any time soon.

The New Zealand dollar eased back to about 70 US cents at the start of a week in which the Reserve Bank is expected to reiterate it won't raise interest rates any time soon, with the on-hold view reinforced by weaker growth figures.

The kiwi dollar traded at 70 US cents as at 8am in Wellington from 70.17 cents in New York on Friday and 69.90 cents in Wellington at the end of last week. The trade-weighted index was at 76.18 from 76.20 in New York.

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The Reserve Bank is scheduled to release its latest review of interest rates on Thursday, including its one-page assessment of monetary conditions. The bank projected no change in the official cash rate at a record low 1.75 per cent until late 2019 in its February 9 monetary policy statement. Last week figures showed the New Zealand economy slowed to a 0.4 per cent pace in the fourth quarter, less than half the 1 per cent rate the central bank had forecast, while the TWI is below the 79 average level it expected for the first quarter, reducing the kiwi's deflationary impact.

"In what is looking to be a quiet week ahead on the global economic calendar, the focus for the market will turn to Thursday's RBNZ OCR review," said Jason Wong, currency strategist at Bank of New Zealand, in a note. "That event itself is unlikely to see much change in the RBNZ's policy tone, but until then tight ranges could well prevail anyway. We see the balance of risk tilted towards the NZD making up a little more ground over coming trading sessions."

Today, traders will be watching for the BNZ-BusinessNZ PSI for February for a reading on the services sector after its manufacturing (PMI) counterpart last week showed a pickup in activity.

The latest GlobalDairyTrade auction, out this week, will show whether a pickup in supplies of dairy products on global markets will continue to weigh on prices after whole milk powder tumbled 12.4 per cent in the last auction two weeks ago.

The kiwi fell to 56.50 British pence from 56.63 pence in New York on Friday and traded at 65.21 euro cents from 65.31 cents. It edged up to 91.09 Australian cents from 90.96 cents, fell to 4.8300 yuan from 4.8397 yuan and dropped to 78.83 yen from 79.05 yen.