Forex News: NZ Dollar Falls Amid Risk-off Mood

NZ Dollar Falls Amid Risk-off Mood

(RTTNews) - The New Zealand dollar weakened against other major currencies in the Asian session on Wednesday amid increased risk-off mood, as traders are reluctant to make significant moves ahead of the U.S. Fed's monetary policy announcement later in the day. While the Fed is widely expected to lower interest rates by another quarter point, there is considerable uncertainty about the longer-term outlook for rates.

Traders are likely to pay close attention to the wording of the Fed's accompanying statement as well as Fed Chair Jerome Powell's post-meeting press conference for clues about the outlook for interest rates.

CME Group's FedWatch Tool is currently indicating an 87.4 percent chance the Fed will lower rates by a quarter point on Wednesday but a 67.5 percent chance the central bank will leave rates unchanged in January.

Crude oil prices slumped as Iraq resumed crude flow from Lukoil's West Qurna oil fields while the U.S. dollar gained ground after job data from the U.S. West Texas Intermediate crude for January delivery was down $0.66 or 1.12 percent at $58.22 per barrel.

In economic news, data from the National Bureau of Statistics showed that China's consumer price inflation accelerated in November and factory gate prices continued to fall. The consumer price index rose 0.7 percent on a yearly basis in November, in line with expectations, and faster than the 0.2 percent increase in October.

On a monthly basis, the CPI was down 0.1 percent, confounding expectations for an increase of 0.2 percent.

Core inflation, which excludes volatile food and energy prices, held unchanged at 1.2 percent in November.

Another report from the NBS showed that producer prices declined 2.2 percent from a year ago in November, after a 2.1 percent drop in the previous month. Economists were expecting a 2 percent fall for November. Producer price inflation remained negative for 38 consecutive months.

Meanwhile, the NZ dollar may continue to benefit from the Reserve Bank of New Zealand's (RBNZ) hawkish perspective on future policies. The RBNZ announced the end of its easing cycle after cutting its policy rate by 25 basis points in November to the lowest level in almost three years.

In the Asian trading today, the NZ dollar fell to 2-day lows of 0.5761 against the U.S. dollar and 1.1517 against the Australian dollar, from yesterday's closing quotes of 0.5781 and 1.1489, respectively. If the kiwi extends its downtrend, it is likely to find support around 0.56 against the greenback and 1.16 against the aussie.

Against the yen and the euro, the kiwi edged down to 90.24 and 2.0176 from Tuesday's closing quotes of 90.70 and 2.0111, respectively. On the downside, 86.00 against the yen and 2.06 against the euro are seen as the next support levels for the kiwi.

Looking ahead, U.S. MBA mortgage approvals data, U.S. employment cost index for the third quarter and U.S. EIA crude oil data are slated for release in the New York session.

At 9:45 am ET, the Bank of Canada is scheduled to announce its interest rate decision. The central bank is expected to keep its interest rate unchanged at 2.25%.

At 10:30 am ET, The BoC Governor Tiff Macklem is scheduled to conduct post-meeting press conference.

At 2:00 pm ET, the U.S. Federal Reserve's FOMC will announce the outcome of its two-day policy meeting.

Half-an-hour later, the U.S. Fed chair Jerome Powell is scheduled to conduct post-meeting press conference, and his comments will be closely tracked because any shift in the Fed's rate path can influence foreign inflows.

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