Sharechat Logo

Dollar holds as markets pick RBA to keep hiking rates

Wednesday 17th February 2010

Text too small?

The New Zealand dollar held above 70 US cents as markets sentiment for the trans-Tasman currencies was bolstered by the prospect of further rate hikes by Australia’s central bank.  

The Reserve Bank of Australia’s minutes out yesterday indicated further increases in the nation’s benchmark interest rate are likely, though they didn’t expect to do so at every meeting. The Australian dollar surged 1.2% to 90.12 US cents, and noted RBA watcher Terry McCrann of the Australian newspaper speculated the central bank may hike rates by as much as 200 basis points this year. New Zealand’s central bank is on a slower track to tighten monetary policy, with markets picking the official cash rate to rise by 155 basis points this year, according to Overnight Index Swap curve.  

“The kiwi’s back over 70 US cents for now, though to a certain extent it got dragged along with the Australian dollar,” said Chris Tennent-Brown, economist at Commonwealth Bank of Australia. “There’s no doubt (Australian) rates will go higher this year – we’re picking to about 5%,” which is 175 basis points above its current level, he said.  

The kiwi climbed to 70.56 US cents from 70.31 cents, and was little changed at 65.04 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.02. It grew to 63.61 yen from 63.20 yen yesterday, and dropped to 78.31 Australian cents from 78.60 cents. It slipped to 51.31 euro cents from 51.44 cents yesterday, and was little changed at 44.73 pence from 44.75 pence.  

Tennent-Brown said the currency may trade between 69.50 US cents and 71 cents today, though the improved global sentiment as US investors returned should support it in the top end of the range.  

European Union finance ministers largely ruled out a bailout for debt-stricken Greece, though they pushed the Mediterranean nation to speed up its programme to reduce its deficit.  

Stocks on Wall Street gained with fourth-quarter earnings on track to be expectations, with figures in so far ahead of forecasts by about 10%, according to Keith Poore, head of investment strategist at AXA Global Investors.  

“At some stage the market had to turn its attention to the good news coming out of the US Q4 earnings season,” he said. “Sales growth continues to come through for a broad range on sectors. Thus far, earnings are delivering on the promise baked in the price.”

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar gains on G20 preference for growth
NZ dollar dips as Wellington CBD checked for quake damage
NZ dollar gains, bolstered by RBA minutes, strong dairy prices
NZ dollar falls after central bank says it may scale up currency intervention
NZ dollar gains before CPI, helped by dairy gains, rally on Wall Street
NZ dollar trades little changed as US budget talks bear down on deadline
NZ dollar falls with equities on view US to sail over fiscal cliff
NZ dollar weakens as fiscal cliff looms, long bets unwind
NZ dollar sinks to three-week low as equities fall, fiscal talks in focus
NZ dollar slips as fiscal cliff talks grind slower in Washington