SINGAPORE — The euro was pinned to a
five-week low on Wednesday as prospects for peace in Ukraine
seemed to darken, while the kiwi was whipsawed after New
Zealand’s central bank announced its sharpest rate hike in two
decades to curb inflation.
While the 50 basis point hike by the Reserve Bank of New
Zealand was larger than many economists had expected, it was
within traders’ expectations, and policymakers tempered the move
by not lifting their projected peak for rates.
The Bank of Canada meets later on Wednesday and is also
expected to deliver its sharpest hike since 2000 as policymakers
around the world start hastening efforts to contain growing
The kiwi flickered as high as $0.6902 after the
Reserve Bank of New Zealand lifted its official cash rate (OCR)
But the currency recoiled from resistance around its 200-day
moving average, and was last nearly 1.5% below its intraday high
at $0.6811, as the central bank framed its actions as pulling
forward hikes without changing its outlook.
Analysts reckoned support for the currency might be
“It’s sort of a dovish 50-point hike,” said Jason Wong,
senior markets strategist at BNZ in Wellingon.
“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 125.60 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 U.S. 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 dropped to $1.0821 overnight and hovered
nearby at $1.0835 in the Asian session. Sterling, which
has been pegged near $1.30, held at $1.3001.
The Australian dollar and Chinese yuan also
weakened slightly after a surprise plunge in China’s imports
added to investor worries about weakening demand.
Dollar denominated imports fell 0.1%, the first drop since
August 2020, against expectations for a rise of 8% and the
Aussie wobbled 0.1% lower to $0.7445.
The yuan inched marginally lower after the data
to hold steady for the day at 6.3661 per dollar.
The Canadian dollar 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.
“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
Policy decisions are due in Singapore and Europe later in
Currency bid prices at 0518 GMT
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Euro/Dollar $1.0832 $1.0826 +0.05% +0.00% +1.0840 +1.0812
Dollar/Yen 125.6550 125.3550 +0.15% +0.00% +125.7200 +125.3550
Dollar/Swiss 0.9329 0.9324 +0.05% +0.00% +0.9338 +0.9324
Sterling/Dollar 1.3000 1.3000 +0.00% +0.00% +1.3014 +1.2987
Dollar/Canadian 1.2628 1.2641 -0.09% +0.00% +1.2642 +1.2611
Aussie/Dollar 0.7444 0.7455 -0.15% +0.00% +0.7475 +0.7443
NZ 0.6818 0.6850 -0.46% -0.38% +0.6901 +0.6810
Tokyo Forex market info from BOJ
(Reporting by Tom Westbrook;
Editing by Shri Navaratnam)