By Gina Lee
Investing.com – The dollar was down on Tuesday morning in Asia. The New Zealand dollar, meanwhile, rose as a strong business survey in New Zealand drove expectations for an earlier-than-expected interest rate hike.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies was down 0.28% to 92.157 by 12:52 AM ET (4:52 AM GMT).
The GBP/USD pair was up 0.25% to 1.3880, with the U.K. set to end social distancing and capacity limits at venues in England from Jul. 19.
The New Zealand Institute of Economic Research (NZIER) business confidence index climbed from the first quarter’s 13% contraction to 7% growth in the second quarter of 2021. The sharp improvement also prompted ASB Bank to pull forward interest rate hike expectations to November 2021.
“It is very clear that record amounts of monetary stimulus are no longer needed to support the economy and inflation risks are getting too high for comfort… we now expect the Reserve Bank of New Zealand (RBNZ) to start lifting the official cash rate from November 2021 instead of the previous May 2022,” ASB senior economist Jane Turner in a note.
Should RBNZ hike rates in November as predicted, it would join Norges Bank, which out of the Group of 10, or G10, central banks is alone in forecasting a hike in 2021.
Across the Tasman Sea, the Reserve Bank of Australia (RBA) kept its interest rate unchanged at 0.10% as it handed down its policy decision earlier in the day. The RBA has previously said that it would keep rates unchanged until 2024, and the New Zealand dollar hit a one-month high against its Antipodean counterpart ahead of the decision.
Elsewhere, investors are also monitoring a sharp rise in oil prices after the Organization of the Petroleum Exporting Countries and allies (OPEC+) abandoned its latest meeting on Monday. The Norwegian crown was up 0.3% during the previous session, while rising prices also lent support to the Canadian dollar.
U.S. markets were closed for a holiday on Monday, with the U.S. Institute of Supply Management (ISM) non-manufacturing purchasing managers’ index (PMI) for June due later in the day.
Investors also await the minutes from the U.S. Federal Reserve’s June policy meeting, due later in the day. The minutes could determine the greenback’s near-term direction as they provide clues on the central bank’s surprise hawkish shift during that meeting that projected rate hikes starting in 2023.
“We still think it’s a bit early for any material detail to be decided about tapering, but these minutes may certainly offer the beginnings of providing at least some sense of what members are thinking,” RBC Capital Markets Asia FX strategist Alvin Tan told Reuters.
Dollar Down, but NZ Dollar Rises as Chance of Earlier Interest Rate Hike Grows
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