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NZ dollar pushes higher in Asian session on buoyant risk appetite

Monday 15th January 2018

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The New Zealand dollar gained as new records on Wall Street spurred a global rally in equity markets and stoked investors' appetite for other risk-sensitive assets.

The kiwi traded at 72.66 US cents as at 5pm in Wellington from 72.56 cents at 8am, and up from 72.54 cents on Friday in New York. The trade-weighted index was at 74.85 from  74.93.

Stocks across Asia gained, with Hong Kong's Hang Seng up 1 percent in afternoon trading, as new records on Wall Street's three major indices - the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 - stoked investor demand for risk-sensitive assets such as commodities and currencies linked to the price of raw materials. 

"It's a world where risk assets are doing well. The global economy is in a big synchronised upswing and people are pretty positive and the New Zealand dollar typically performs very well in that environment and the US dollar doesn't," said ANZ Bank New Zealand senior economist Phil Borkin. While the kiwi is benefiting, Borkin underscored "it's much more a weaker US dollar story rather than anything NZ dollar related."  

He noted the kiwi dipped local government figures showed the food price index fell 0.2 percent on a seasonally adjusted basis in December versus the prior month. "There was a bit of softness there, so perhaps people are re-assessing their views on the fourth-quarter CPI," said Borkin. Statistics New Zealand will publish the inflation data on Jan. 25. 

Still, that weakness was short-lived, and Borkin said the kiwi immediately popped back towards 73 US cents and "that seems to be where the bias is at the moment." 

Investors will be watching for tomorrow's fourth-quarter survey of business opinion from the New Zealand Institute of Economic Research to see if confidence remains weak. A seasonally adjusted net 7 percent of firms surveyed in September anticipated better economic conditions in the coming year versus 17 percent in the June quarter, as uncertainty around the election sapped business confidence. Borkin said this week's dairy auction and the ANZ commodity price index will also be watched.

"There are certainly a few things that could throw it around but the biggest theme is the weaker US dollar story and positive risk appetite. It would take a lot for the domestic data to sway the market," he said

The kiwi was at 59.55 euro cents versus 59.41 euro cents from the New York close Friday. It traded at 91.49 Australian cents from 91.60 cents on Friday in New York and fell to 4.6666 Chinese yuan from 4.6821 yuan. The currency was unchanged at 80.45 yen from Friday and traded at 52.88 British pence from 52.76 pence. 

New Zealand's two-year swap rate rose 2 basis point to 2.21 percent while the 10-year swap rose 3 basis points to 3.22 percent.


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