Kiwi rises as risk appetite stays buoyant

Monday 4th April 2011

The New Zealand dollar reached a seven-week high against the greenback as overseas demand for the kiwi remained solid against a backdrop of buoyant risk appetite and rising commodity prices.

At 8am today the NZ dollar was buying US76.87c, up from US76.13c at 5pm on Friday.

The addition of more than 200,000 US jobs last month, while the US jobless rate slipped to 8.8 percent, pushed the US dollar above 84 yen, its highest in more than six months, as traders expect Japanese interest rates to stay at a record low.

New York Federal Reserve President William Dudley upended a US dollar rally against the euro though, when he said he saw no reason to adjust the central bank's loose monetary policy despite the encouraging jobs data.

The European Central Bank, on the other hand, is expected to raise rates this week, the first of what some predict will be several rate increases scattered throughout the year.

The Bank of Japan is widely expected to lag behind the Federal Reserve and the European Central Bank in raising interest rates, especially after the March 11 earthquake and tsunami.

Analysts said that will enhance yen carry trades, which involve borrowing yen cheaply to finance more lucrative trades in higher-yielding currencies and assets.

The carry trade has "come back with a vengeance," said Boris Schlossberg, director of research at GFT Forex, and the yen could assume its former status as the funding currency of choice as rates in economies of other Group of 20 nations start to rise.

The NZ dollar rose to its highest level against the Japanese currency in more than four months, buying 64.72 yen at 8am today from 63.74 at 5pm on Friday.

The kiwi was also up to 0.5401 euro from 0.5374 and lifted to A73.93c against the Australian dollar from A73.56c. The trade weighted index was up to 67.27 at 8am today from 66.79 at 5pm on Friday.

NZPA

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