NZ dollar rises as Bernanke says US needs low rates to stoke jobs growth

Tuesday 27th March 2012

The New Zealand dollar rose after Federal Reserve Chairman Ben Bernanke said an accommodative monetary policy is still needed in the world’s largest economy to stoke a stagnant jobs market, and prompted investors to seek higher yields elsewhere.

The kiwi gained to 82.18 US cents at 8am from 81.60 US cents yesterday. The trade-weighted index increased 72.95 to from 72.72.

Stocks on Wall Street gained as investors sought bigger returns after the Fed’s Bernanke reaffirmed the Fed’s commitment to low interest rates to spur jobs growth as the unemployment rate stays persistently high at 8.3 percent.

A reduction in the jobless rate would require quicker expansion of business production and consumer demand, which “can be supported by continued accommodation policies,” he told a business audience in the US. The Standard & Poor’s 500 Index climbed 1.3 percent to 1414.69.

“There has been a positive push up broadly speaking overnight with equity markets and growth currencies pushing up,” said Michael Hollows, currency strategists at HiFX. “We are looking likely to squeeze a little higher and test the top end of the range at 82.80 US cents.”

Weak US home sales figures underpinned concerns the Fed will stick to its plan to keep interest rates near zero percent until the end of 2014. The index of pending home purchases dropped 0.5 percent to 96.5 in February after a 2 percent gain the previous month, according to the National Association of Realtors.

US consumer confidence is set for release on Tuesday.

The prospect of greater German involvement in bailing out European partners in the sovereign debt crisis bolstered investor confidence, with Chancellor Angela Merkel saying Europe’s biggest economy could back plans for the temporary and permanent euro-area rescue funds to run in parallel.

The comments come ahead of a meeting between European Union ministers in Copenhagen on Friday to discuss plans to combine the temporary European Financial Stability Facility and its permanent successor from July, the European Stability Mechanism.

Business confidence in Germany, Europe’s largest economy, held at an eight-month high 109.8 in March as the nation continues to benefit from a record low unemployment rate and strong exports.

In New Zealand, the national employment indicator for January is set for release today.

The New Zealand dollar crept up to 78.08 Australian cents from 77.99 cents yesterday at 5pm and increased to 61.61 euro cents from 61.53 cents. It rose to 68.12 yen from 67.44 yen yesterday and was little-changed at 51.52 British pence from 51.52 pence.

BusinessDesk.co.nz

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