The New Zealand dollar is facing a record amount of speculative money betting it will go lower with traders more sure of the domestic path to lower interest rates, in contrast to the more opaque outlooking in the US.
The kiwi dollar traded at 55.91 US cents at 7am in Auckland from 56.07 cents, having shed 11% against the greenback in 2024 and touching two-year lows this week.
Traders have fallen in behind the greenback as investors ponder the inflationary impact of US President-elect Donald Trump’s policy prescription and the persistent strength of the world’s biggest economy, prompting economists to dial back their expectations for further interest rate cuts by the Federal Reserve.
Reports that Trump may stagger the imposition of tariffs slowed the greenback’s ascendancy yesterday, but Bank of New Zealand senior interest rate strategist Stuart Ritson pointed to Commodity Futures Trading Commission figures showing speculative accounts hold US$34 billion of long positions in the greenback, the most since 2019.
“The CFTC data also indicated that speculative accounts added to NZD short positions which have a reached a record level,” he said in a note.
The greenback continued to drift off in overnight trading as US data showed producer price inflation cooled in December ahead of consumer price figures due on Wednesday in Washington.
Quiet streets of New York
Wall Street was relatively muted as investors prepare for the latest round of earnings, with the major banks poised to report their December quarter results in the coming days.
Ahead of JPMorgan Chase’s result, the biggest bank in the US announced a reshuffle among chief executive Jamie Dimon’s lieutenants, with Jennifer Piepszak taking over as chief operating officer from Daniel Pinto, who plans to retire. Both were touted as potential successors to Dimon when he eventually leaves the top chair.
The Dow Jones Industrial Average was flat in Tuesday trading, while the Nasdaq was weaker with tech stocks generally weaker.
Social media firms Meta Platforms and Snap both declined amid reports that Chinese officials have discussed options for a trusted non-Chinese party such as Elon Musk – the owner of X, formerly Twitter – to invest in or take control of TikTok’s US operations. Musk’s Tesla was stronger in afternoon trading.
Eli Lilly declined after the drugmaker warned sales of its diabetes and anti-obesity drugs were growing at a slower pace than expected. Novo Nordisk – the maker of Ozempic and Wegovy, also declined.
Across the pond, BP slipped in a weaker day for the FTSE 100 in the UK, after the oil giant warned December earnings would be knocked by weaker oil and gas production, and softer refining margins.
There’s little in the way of local data today, and Australian futures are pointing to a softer day for the S&P/ASX 200 index. New Zealand’s benchmark S&P/NZX 50 index snapped a three-day decline yesterday.
Reporting by Paul McBeth. Image from Joshua Hoehne on Unsplash.
This story has been updated to correct a typo in Stuart Ritson's title.
