Reuters New Zealand
NZ dollar at 2-week low on rate risk, bonds flat
Wednesday July 23, 05:37 PM
WELLINGTON, July 23 (Reuters) - The New Zealand dollar NZD= fell to a two-week low against the U.S. dollar on Wednesday as investors nervously awaited the central bank's monetary policy decision on Thursday, wary of the risk of a rate cut.
The kiwi fell as low as $0.7551 NZD=D4, also pushed down by a broadly firmer U.S. dollar and news that a leading non-bank lender was in trouble.
With markets viewing a potential cut to New Zealand's 8.25 percent official cash rate as a tight call, news that Hanover Finance had suspended repayments on its loans underscored how bad the credit situation is, said RBC Capital Markets senior currency strategist Sue Trinh.
"If our expectation of a rate cut materialises, then the kiwi is set to head below $0.75," Trinh said.
The kiwi was at $0.7550/53 at 0500 GMT, from $0.7602/06 in late local trade on Tuesday. The currency tracked steadily lower from opening levels about $0.76, after reaching a high of $0.7634 in offshore trade.
A Reuters poll shows 13 of 17 analysts expect the central bank to wait until September before easing, though the median chance of a cut on Thursday was put at 40 percent.
The decision is at 9 a.m. local time (2100 GMT).
Hanover Finance said in a statement it would suspend investment and repayments as it worked on a plan to restructure the business. The company, which has NZ$554 million in funds invested, is New Zealand's fifth-largest finance company by asset value.
The U.S. dollar held its ground in Asian trade, after rallying strongly the previous day on lower oil prices and hawkish comments from U.S. policymakers.
New Zealand government debt was unchanged, with the yield on the benchmark NZ 10-year government bond NZ10YT=RR at 6.18 percent. (Reporting by Adrian Bathgate; Editing by James Thornhill)
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