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FX Market Operation Report
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Last Update: March 10, 2010 05:24 EST
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RBNZ to Keep Rate Unchanged
Reserve Bank of New Zealand (RBNZ) will deliver a rate decision in the afternoon and is broadly expected to hold its pledge that keeping the cash rate unchanged until middle of this year. And the central bank may repeat that New Zealand¡¯s economy consists with expectation.
When RBNZ kept its interest rate unchanged at 2.50% in last meeting, the Governor Alan Bollard said in the accompanying statement that ¡°The outlook for the New Zealand economy remains consistent with the projections underlying the December Monetary Policy Statement.¡±, ¡°Global activity continues to recover, helping push New Zealand¡¯s export commodity prices higher¡. the New Zealand economy continues to recover¡±, ¡°Annual CPI inflation is currently at the centre of the target band, and is expected to track comfortably within the band over the medium term.¡±, ¡°If the economy continues to recover in line with our December projections, we would expect to begin removing policy stimulus around the middle of 2010.¡±
The latest news from labor market and retailers is disappointed. The unemployment rate rose more-than-expected to a 10-year-high 7.3% in the fourth quarter from 6.5%. And retail sales stalled in December while core retail sales dropped 1.8% from November.
Improved data are from business confidence and trade. The NBNZ business confidence surged to 50.1 in February from 38.5. Trade balance rose to a 269 million NZ dollar surplus in January from prior month¡¯s deficit.
RBNZ said in its March quarter Survey of Expectation that Average one-year-ahead CPI inflation expectations are unchanged at 2.1 percent. Two-year-ahead expectations have increased fractionally, from 2.61 percent last quarter to 2.65 percent. On the other hand, one-year-ahead GDP growth is expected to rise to 2.1% and two-year growth expectations have improved by 0.3 percentage points, and are now 2.6%. Meanwhile an exchange rate of US$0.70 is expected for the NZ dollar at the end of June, and to be around that same level by the end of December 2010.
Market Action
Dollar climbed before U.S. session as stocks merely changed, cooling the risk appetite. NZD stayed strong as commodity prices rallied.
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