New Zealand dollar cuts gains overnight after weak business confidence

The New Zealand dollar partially reduced its overnight gains against the greenback after a monthly survey showing that business confidence remained weak in November, but that the local currency should resume its recovery.

The kiwi traded at 68.55 US cents at 5 pm in Wellington, against 68.77 US cents at 8 am and 67.94 cents yesterday. The trade weighted index rose from 74.37 yesterday to 74.66.

The New Zealand dollar picked up steam when US Federal Reserve Chairman Jerome Powell said the US key rate was now "just below" the neutral stance, causing investors to lower their expectations of a further rise in rates.

However, it weakened when the ANZ business outlook survey showed that New Zealand business confidence remained in the doldrums in November. The general sentiment and business perspective of their own business remained virtually unchanged from the previous month.

In all, 37.1% of the companies surveyed as part of the ANZ business outlook survey in November expect a deterioration in general economic conditions over the next 12 months, with no change by report to October.

"The data was not flashed … it should have been better," said Tim Kelleher, head of institutional currency sales at ASB Bank.

However, "the Fed clearly depends a little more data and a little more reticence, so the kiwi dollar should remain on the downside," he said.

"The path of least resistance for currencies is the decline of the US dollar" over the next two to three weeks, he said. "Maybe early January 2019," he said.

Investors are also awaiting news of a possible resolution of the US-China conflict, as leaders of both countries sit down during this weekend's talks at the G20 meeting in Argentina.

The kiwi was at 53.38 British pence from 53.32 pence yesterday and 60.22 euro cents to 60.17 cents.

The local currency traded at 93.77 Australian cents against 93.88 cents yesterday and at 4.7578 yuan for 4.7240 yuan. It went from 77.32 yen to 77.69 yen yesterday.

New Zealand's two-year swap rate remained unchanged at 2.09%; the 10-year swaps remained unchanged at 90%.