The dollar waits for the Fed minutes, the kiwi on rate expectations

SINGAPORE, July 6 (Reuters) – The New Zealand dollar appreciated on Tuesday after a robust business survey pushed back expectations of rate hikes there as early as November, while its Australian counterpart climbed ahead of its central bank’s own crucial policy meeting later today.

The US dollar and other major currencies were mostly stable as investors await the report of the Federal Reserve meeting in June, when it surprised markets with a hawkish turn. They should be released on Wednesday.

The euro held steady at $ 1.1860, roughly where it left off on Friday and the yen edged up to 110.86 per dollar. The pound sterling rose after Britain made plans to end COVID-19 restrictions in a fortnight and last bought $ 1.3857.

The kiwi rose 0.4% to a one-week high of $ 0.7066, briefly breaking its 200-day moving average, before settling around $ 0.7055 in morning trading.

The Aussie climbed 0.2% to $ 0.7541, although it was capped ahead of the Reserve Bank of Australia (RBA) meeting.

A survey of businesses in New Zealand showed marked improvement in confidence, a willingness to raise prices and a record level of companies facing hiring problems, prompting ASB Bank to postpone expectations rate hike to just four months.

“It is very clear that record amounts of monetary stimulus are no longer needed to support the economy and the risks of inflation are becoming too high for comfort,” SBA senior economist Jane Turner said in a note. “We now expect the RBNZ to start lifting OCR from November of this year (previously May 2022).”

Swap prices have also changed to indicate about a 3/4 chance of a hike in November which, if it did occur, would put the Reserve Bank of New Zealand on par with the super-hawkish Norges Bank which is the only one. among the G10 banks to plan a 2021 a hike.

Against the Australian dollar, the kiwi has peaked in one month, as forecasts of hikes in four months contrast with the RBA, which previously said it did not plan to hike rates until 2024.

That may change on Tuesday, with the central bank indicating it will decide the fate of its bond buying program and its three-year yield target.

Economists expect the three-year yield target – which is set at the level of the 0.1% cash rate – to remain on the April 2024 bond – and the RBA to take a flexible approach for bond purchases.

Elsewhere, a sharp rise in oil prices following abandoned talks among producers over production levels pushed exporters’ currencies higher, pushing the Norwegian krone up 0.3% overnight and supporting the dollar. Canadian.

On the horizon later today – when US markets return from vacation – is a US services survey and a German sentiment survey.

Fed minutes on Wednesday could determine the dollar’s near-term direction as investors seek insight into the thinking behind last month’s hawkish turn in which Fed members projected a rate hike to begin in 2023 .

“We still think it’s a bit early to decide on any important details regarding the reduction, but this review can certainly offer the start of an idea of ​​what members are thinking,” said Alvin Tan, Asia FX strategist. at RBC Capital Markets. .

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Reporting by Tom Westbrook. Editing by Shri Navaratnam

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