NZ dollar extends gain as uncertainty over Fed rate hikes weigh on greenback

Thursday 15th October 2015

The New Zealand dollar extended its gain as uncertainty over the timing and pace of US interest rate hikes continue to weigh on the greenback.

The kiwi rose to 68.22 US cents at 5pm in Wellington from 67.85 cents at 8am and 66.77 cents yesterday. The trade-weighted index advanced to 72.61 from 71.64 yesterday.

The US dollar index, a measure of the greenback against a basket of currencies, fell to a seven-week low after weaker than expected US retail sales and producer inflation data dimmed the prospects for the Federal Reserve to start raising interest rates. A slower start to monetary tightening in the US has whetted investors' appetite for currencies whose central banks are running interest rates above zero percent, and risk-sensitive assets such as the kiwi have found support over the past week-and-a-half as volatility in global markets eased.

"The last 24 hours especially have been a continuation of broad US dollar selling as opposed to anything specifically New Zealand-related," said Raiko Shareef, currency strategist at Bank of New Zealand in Wellington. "There's some pretty strong resistance at 68.50 (US cents) - that's the target people are looking for and momentum suggests we'll test that."

Still, Sharef said a turn in investor sentiment could erode the local currency's recent gains and BNZ is "wary of big ranges in the kiwi."

Local data today showed New Zealand manufacturing activity picked up in September on rising new orders, while a separate survey reported consumer confidence improved this month as low mortgage rates and a rebound in dairy prices soothed New Zealanders' fears about the economy.

New Zealand's two-year swap rate increased one basis point to 2.71 percent, and the 10-year swap rate fell five basis points to 3.47 percent.

The kiwi rose to 92.80 Australian cents from 92.27 cents yesterday after Australian Bureau of Statistics data showed the number of people employed slipped last month, while the jobless rate was unchanged at 6.2 percent.

The local currency climbed to 4.3274 Chinese yuan from 4.2378 yuan yesterday, and gained to 81.20 yen from 79.90 yen. It rose to 59.42 euro cents from 58.62 cents, and advanced to 44.09 British pence from 43.67 pence.

BusinessDesk.co.nz

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