Published: Sat, January 13, 2018
Business | By Max Garcia

NZD climbs above US72c on European Central Bank minutes

NZD climbs above US72c on European Central Bank minutes

The rise in yields adds to a sell off that intensified on Thursday after minutes from the ECB's December meeting showed the bank could revisit its policy messaging in early 2018 and gradually adjust its language to reflect improved growth prospects. Japan's Nikkei, however, dropped for a third day, shedding 0.2 per cent for the day and 0.3 per cent for the week.

Wall Street surged to record highs on Thursday as rising oil prices lifted energy stocks and investors bet on a strong US corporate earnings season.

In Europe, Germany's DAX fell 0.1 percent to 13,196 while Britain's FTSE 100 rose 0.2 percent to 7,777. Chances of an interest rate hike next week, which had climbed on recent strong employment figures, have slipped to around 70 percent from almost 90 percent on Monday, data from the overnight index swaps market showed.

Bonds recovered somewhat this morning after Chinese officials backtracked on suggestions that the state planned to slow its purchases of U.S. Treasurys.

Benchmark 10-year notes last rose 4/32 in price to yield 2.5367 percent, from 2.549 percent late on Wednesday.

Abridged minutes of a December meeting of the European Central Bank governing council said there was a "widely shared" view among officials that communication would need to evolve gradually based on the outlook for growth and inflation. This also suggests a move away from excessive QE, as hinting at increasing policy rates (raising interest rates) is the first step towards actually performing this action. But interest rates, still well into negative territory, are not expected to rise until around mid-2019. "If that doesn't go down well in markets, the bank will modify its message but it should want to at least test the water", said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.

The Pound to Euro (GBP/EUR) exchange rate looks on track to end the week below its opening levels despite testing a three-week-high of 1.1350 near the beginning of the week.

On the other hand, the dollar was broadly weak after U.S. wholesale price dipped in December from November, reinforcing investors' expectations of a tame inflation.

The US currency slipped to a six-week low of 111.05 yen on Thursday and last stood at 111.21 yen. Australia's S&P/ASX 200 gained less than 0.1 percent to 6,070.10.

The energy sector led the gains as oil prices rose to three-year highs while interest rate sensitive-sectors, such as utilities and real estate companies, underperformed. The U.S. currency is still down more than 1 percent against the yen this week after markets bet the Bank of Japan (BoJ) could start to tighten monetary policy faster than expected.

New Zealand's currency was also boosted by higher commodity prices, with Brent Crude oil rising above US$70 a barrel for the first time since 2014.

But growth is into its fifth year, employment is at a record high and convergence between the 19-member currency bloc's core and periphery has restarted, all pointing to unabated growth and a declining need for central bank help.

The British pound increased 1.4 percent to $1.373, the strongest since June 2016.

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