FOREX-Euro weighed down by waning hopes for peace, kiwi helped by RBNZ hike

By Tom Westbrook

SINGAPORE, April 13 (Reuters)The euro was pinned to a five-week low on Wednesday as prospects for peace in Ukraine seemed to darken, while the kiwi was boosted when New Zealand’s central bank delivered its steepest rate hike in two decades.

The Bank of Canada meets later on Wednesday and is also expected to deliver a 50-bp hike as policymakers around the world start hastening efforts to contain inflation. BOCWATCH

The kiwi USD=D3 flickered as high as $0.6902 after the Reserve Bank of New Zealand lifted its official cash rate (OCR) by 50 basis points to 1.5%.

But the currency couldn’t break resistance around its 200-day moving average, and settled below it at $0.6867, as the central bank framed its actions as pulling forward hikes without changing its outlook.

“This ‘stitch in time’ approach is consistent with near-term financial market pricing,” policymakers said in the meeting minutes, which were released with their decision.

Analysts reckoned support for the currency might be shortlived.

“It’s sort of a dovish 50-point hike,” said Jason Wong, senior markets strategist at BNZ in Wellington.

“They’re saying it’s just a bringing forward of a hike and the RBNZ hasn’t really changed it’s view on the OCR outlook from the February statement,” he added, noting that the market has a far more hawkish peak rate forecast than the central bank does.

Elsewhere, traders were unmoved by a slight stiffening in Japanese officials’ language about the fast-weakening yen, which was under considerable pressure at 125.62 per dollar, within a whisker of breaking a major support level at 125.86.

Finance Minister Shunichi Suzuki said the government was watching currency moves with a sense of urgency.

The yen had enjoyed a moment’s respite overnight when cooler-than-expected US inflation data set bonds rallying and investors hoping that price pressures might have peaked.

A second straight monthly decline in prices of used cars held core CPI to a 0.3% gain in March, against an expected 0.5% rise. But, since headline annual inflation nevertheless came in at an eyewatering 8.5% and rapid rate hikes still loom, it wasn’t enough to drive investors out of dollars.

Russian President Vladimir Putin’s description of on-and-off peace negotiations as “a dead-end situation” on Tuesday also put a weight on the euro and sterling, which have been vulnerable to concern about the war’s economic fallout.

The euro EUR=EBS dropped to $1.0821 overnight and hovered nearby at $1.0835 in the Asian session. Sterling GBP=D3which has been pegged near $1.30, held at $1.3011.

The Australian dollar AUD=D3at $0.7469, held overnight gains made with a bounce in oil prices.

The Canadian dollar CAD=D3 firmed through its 200-day moving average to C$1.2614 in Asia, though traders are jittery ahead of the Bank of Canada meeting, especially as the market is slightly short USD/CAD. CADNETUSD=

“I think the risk around the Bank of Canada meeting is that they sound balanced enough to trigger a wipeout of USD/CAD shorts,” said Brent Donnelly, president at analytics firm Spectra Markets.

Policy decisions are due in Singapore and Europe later in the week.

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Currency bid prices at 0245 GMT

Description

RIC

Last

US Close Previous Session

Pct Change

YTD Pct Change

High Bid

Low Bid

Euro/Dollar

EUR=EBS

$1.0835

$1.0826

+0.09%

+0.00%

+1.0838

+1.0812

Dollar/Yen

JPY=EBS

125.5850

125.3550

+0.20%

+0.00%

+125.6400

+125.3550

Euro/Yen

EURJPY=EBS

136.08

135.73

+0.26%

+0.00%

+136.0900

+135.7100

Dollar/Swiss

CHF=EBS

0.9324

0.9324

+0.03%

+0.00%

+0.9338

+0.9325

Sterling/Dollar

GBP=D3

1.3011

1.3000

+0.09%

+0.00%

+1.3013

+1.2987

Dollar/Canadian

CAD=D3

1.2614

1.2641

-0.21%

+0.00%

+1.2642

+1.2614

Aussie/Dollar

AUD=D3

0.7472

0.7455

+0.25%

+0.00%

+0.7475

+0.7444

NZDollar/Dollar

USD=D3

0.6868

0.6850

+0.27%

+0.00%

+0.6901

+0.6843

All spots FX=

Tokyo spots AFX=

European spots EFX=

Volatilities FXVOL=

Tokyo Forex market info from BOJ TKYFX

World FX rateshttps://tmsnrt.rs/2RBWI5E

(Reporting by Tom Westbrook; Editing by Shri Navaratnam)

((tom.westbrook@tr.com; +65 6973 8284;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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