Kiwi Jumps Over 1% After New Zealand Official Cash Rate Hike

June 12, 2014

The New Zealand dollar advanced 1.4% net against its U.S. counterpart and got as strong as USD 0.8690 following the Reserve Bank of New Zealand’s scheduled monetary policy meeting.  While a third 25-basis point tightening since March had been anticipated, investors reacted most to the accompanying guidance that points to greater-than-assumed further tightening in the year ahead.

In other central banking news,

  • Bank Indonesia left its BI interest rate at 7.5%, the level since last November.  Five rate hikes totaling 175 basis points were administered between June and November of 2013, but today’s statement accentuated the slowdown of global growth and risks such poses.
  • The Bank of Korea’s seven-day repo rate was kept at 2.5% by a unanimous decision.  Officials noted falling consumer sentiment and the continuing negative output gap that will persist “for the time being.”
  • The Bank of Japan began a two-day monthly policy meeting that is not expected to modify monetary policy.
  • Central bank decisions are also awaited from Peru and Chile.

Aside from the sharp drop against the kiwi, the dollar has been pretty steady, with drops of 0.2% versus the Australian dollar and sterling and 0.1% relative to the yuan and loonie but an uptick of 0.1% against the yen and no net change vis-a-vis the euro or Swiss franc.

The 10-year British gilt yield rose another two basis points, while the 10-year German bund and Japanese JGB yields are unchanged from Wednesday closing levels.

Most stock markets fell in the Pacific Rim.  Declines amounted to 0.8% in Indonesia, 0.5% in Australia, 0.4% in Hong Kong, 0.6% in Japan, 0.3% in China and Taiwan and 0.2% in South Korea.  In Europe, Zurich is down 0.4%, but there have been upticks so far of 0.3% in Spain, 0.2% in France and 0.1% in London and Frankfurt.

West Texas Intermediate oil jumped by 1.5% to $105.93 per barrel on unrest in Iraq.  Gold is 0.4% higher at $1,266 per ounce.

Growth during May in Chinese M2 money (13.4% on year after 13.2% in April and 12.1% in March) exceeded investor expectations.  So did the CNY 871 billion rise in new bank lending following a CNY 775 billion increase in April.

Japanese core domestic private machinery orders plunged 9.1% in April, although not as much as forecast.  Machinery orders from the government and overseas respectively posted monthly surges of 40.5% and 71.3%.

Australian labor statistics for May were softer than forecast.  Employment fell by 4.8K, performing about 15K worse than assumed.  Part-time workers accounted for all of the loss.  Although the unemployment rate held steady at 5.8% for a third straight month, the participation rate slid to 64.6% from 64.7% the month before.

Expected inflation in Australia eased to 4.0% last month from 4.4% in April.

Industrial production in the euro area advanced by 0.8%, about twice as much as assumed, thanks to a 2.5% leap in energy.  Output of capital goods dipped 0.1% on top of March’s 0.6% slide and no change in February.  April output was 0.6% higher than the 1Q mean and up 1.4% compared to the level in April 2013.

German wholesale prices dipped 0.1% in May, but their 12-month rate of decline, 0.9%, was the smallest since last July.  Mineral oil and solid fuel recorded a 2.1% on-year decline.

French consumer price inflation stayed at 0.7% last month.  France also reported a larger-than-forecast EUR 1.6 billion current account deficit in April, which was similar in size to the March deficit.

In the year to May, Portuguese and Swedish consumer prices fell by 0.4% and 0.2%, while the Romanian and Irish CPI indices posted gains of 0.9% and 0.4%.

The Royal Institute of British Chartered Surveyors’ house price index unexpectedly improved in May to a reading of 57% from 55%.

The Greek jobless rate swelled 0.3 of a percentage point to 27.8% last calendar quarter.  The Dutch trade surplus narrowed 7% to EUR 4.5 billion in April.

Markets now await U.S. retail sales and weekly jobless insurance claims data.  U.S. business inventories and Canadian home prices and quarterly capacity usage will be released, too.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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