NZ dollar dips after weak current account data, pares slide ahead of Fed

The kiwi fell to 56.46 British pence as at 8am in Wellington. Photo / File

The New Zealand dollar dipped against the greenback on weaker-than-expected domestic current account data but squeezed back up over the day as investors await the news from the Federal Reserve's policy meeting and local gross domestic product data.

The kiwi was trading at 72.21 US cents as at 5pm versus 72.24 cents late yesterday. It dipped to around 72 US cents after the first quarter current account surplus was a smaller-than-expected $244 million versus a revised fourth-quarter deficit of $2.4 billion. Economists had expected a surplus of $922 million in the first quarter.

"The market thought it was a poor number, a lot worse than expected," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

Figures showing food prices rose at their fastest annual pace in more than six years as increasingly expensive vegetables were made more scarce by the wet autumn weather "scared a few people," he said. There have been a few recent pieces of data that have "hinted a bit of a slowdown," including housing data, he said.

The kiwi didn't move much after data from the Real Estate Institute showed the national median house price increased to $540,000 in May from $506,100 in May last year but was unchanged from April.

The latest report showed "the housing market remained subdued in May," said Westpac Banking Corp acting chief economist Michael Gordon.

Investors will be watching for tomorrow's GDP data, with economists tipping growth on quarter growth of 0.7 percent. Kelleher said, however, ASB is expecting 0.5 percent growth and any disappointment will hit the kiwi-Aussie cross and put parity off the table - for now. The kiwi was trading at 95.72 Australian cents from 95.59 cents late yesterday.

Ahead of the GDP, however, is the Federal Reserve's rate decision and statement where a quarter-point increase in the fed funds rate is widely expected and traders will be watching the Fed's forward guidance to try to gauge whether there will be any more hikes this year.

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"The risk tomorrow is a stronger US dollar," said Kelleher. "I don't see any reason why the Fed won't go and maintain the status quo of one more hike before the end of the year," he added.

If the greenback rebounds strongly "we will see some carnage in less liquid" currencies, he said.

The kiwi was trading at 56.62 British pence from 57.12 pence late yesterday after UK inflation data surprised on the high side. It fell to 4.9066 yuan from 4.9089 yuan and traded at 79.47 yen from 79.46 yen. It declined to 64.36 euro cents from 64.52 cents. The trade-weighted index was at 77.65 from 77.71.

New Zealand's two-year swap rate fell 2 basis points to 2.17 percent while the 10-year swap rate rose 1 basis point to 3.16 percent.