Kiwi pushes on amid speculation about China

Friday 27th May 2011

The New Zealand dollar burst through a key resistance level and headed toward its post-float high today as speculation continued that China's sovereign wealth fund, the Chinese Investment Corporation (CIC), is investing heavily in this country, including in government bonds.

The NZ dollar was at US81.69c at 5pm, up from US81.12c at 8am and US80.69c at 5pm yesterday.

BNZ currency strategist Mike Jones said reports that CIC may have earmarked 1.5% of its foreign currency reserves - roughly $6 billion - to invest in New Zealand assets lit a rocket under the NZ dollar yesterday. The story was written by interest.co.nz.

There was further speculation today that a large buyer of New Zealand government bonds recently was CIC. But one dealer said his bank had no knowledge of CIC as a buyer of New Zealand bonds and people may be confusing CIC with another Chinese institution, the Chinese State Administration of Foreign Exchange (SAFE).

Imre Speizer, senior strategist at Westpac, said the NZ dollar had breached significant resistance at US81.25c.

"That was a key level. It is now going to its post-float high of US82.15c. I'm not saying it is going to break it. It should stall there and correct," he said.

He said there was a lot of chatter in markets about Chinese demand for New Zealand assets and it had gone around the world like wildfire.

Finance Minister Bill English has been in Asia meeting investors after releasing the Government budget last week.

Jones said reports of Chinese buying of New Zealand assets were as yet unconfirmed, but there had been exceptional demand recorded at recent government bond tenders.

The US dollar has also been under pressure on the back of poor economic data and the euro turned higher after being under pressure earlier in the week.

The NZ dollar was at 0.5732 euro at 5pm from 0.5698 at the same time yesterday.

It was at A76.36c at 5pm from A76.17c at the same time yesterday.

The trade weighted index was up to 70.60 from 70.12 yesterday.

NZPA

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