The New Zealand dollar was the strongest performing currency on Thursday as it soared by almost 2% after the Reserve Bank of New Zealand kept interest rates unchanged at 2.25%.
While most economists were not expecting the RBNZ to cut rates at today’s policy meeting, analysts cited the increased concern on house prices in the bank’s statement as a possible hindrance to further cuts. The overall tone of the RBNZ statement was still dovish though as the central bank said that further easing may be required to ensure that it meets its inflation target.
The New Zealand dollar jumped to its highest in a year against the US dollar as it rose to 0.7147. The kiwi’s rally was not duplicated by other commodity currencies as the Australian and Canadian dollars appeared to run out of steam from their recent gains. The aussie eased to 0.7458 in late Asian trading today having earlier broken above the 0.75 level, while the greenback was slightly down against the loonie at 1.2695.
The yen was broadly firmer on Thursday despite a much larger-than-expected drop in machinery orders. Japanese machinery orders tumbled by 11.0% month-on-month in April, missing forecasts of a 3.8% drop. The decline was the largest since May 2014 and was partly as a result of the earthquake that struck south of the country in April.
The yen was also little moved by comments from the Deputy Governor of the Bank of Japan who today said that further easing is still a possibility. The dollar slipped to 106.30 yen in late Asian trading today, while the euro and the pound fell to 121.06 and 153.67 yen respectively.
In other data out of Asia today, Chinese inflation came in weaker than expected, raising the prospect of further monetary easing by the People’s Bank of China. Annual CPI fell from 2.3% in April to 2.0% in May, falling short of estimates that it would stay unchanged. Producer prices however continued to head higher, with annual PPI climbing from -3.4% to -2.8% in May.
The euro extended its advance against the dollar at the start of Asian trading today, climbing to a fresh one-month high of 1.1415 dollars. But it was unable to hold on to its gains and slid below the 1.14 level in late session following comments by ECB President Mario Draghi.
Speaking at the Brussels Economic Forum today, Draghi said the ECB won’t let inflation undershoot their objective “for longer than is avoidable”. The dovish comments overshadowed slightly stronger-than-expected trade data out of Germany today.
Sterling was weaker in Asian trading as the currency continued to be dogged by Brexit concerns. Solid UK manufacturing data from yesterday failed to lend any support the pound on Thursday, which dropped to a low of 1.4452 dollars in late Asian session.
Coming up later today, UK trade figures and US weekly jobless claims will be the main data to watch out for.