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NZ dollar hits 11-week high as rebound in oil prices boosts sentiment

Wednesday 30th December 2015

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The New Zealand dollar hit an 11-week high as higher oil prices boosted demand for currencies linked to commodities.

The kiwi touched 68.86 US cents, and was trading at 68.70 cents at 8am in Wellington, from 68.69 cents at 5pm yesterday. The trade-weighted index touched a fresh six-month high of 74.57 and was at 74.49 at 8am from 74.50 yesterday.

Investors favoured currencies exposed to commodities after a recovery in oil prices boosted sentiment. Oil prices rose amid prospects of colder northern hemisphere weather in coming weeks. West Texas Intermediate crude rose 2.2 percent to US$37.63 a barrel. 

"Over the last 24 hours, you have had a bit of a rebound in commodity prices and in particular the oil price and that has really benefited not only the New Zealand dollar but the Aussie dollar and the CAD, those currencies that are linked to movements in commodities more broadly," said Kymberly Martin, Bank of New Zealand senior market strategist fixed income, currencies and commodities. "It's holiday conditions so trading is quite thin, and moves probably get quite exaggerated."

The BNZ's Martin said the kiwi was approaching crucial levels, having pushed through the 200-day moving average of 68.50 US cents, it was now looking towards resistance at its October highs close to 69 US cents.

Also underpinning the kiwi, traders are pulling back on their short positions betting on its decline, Martin said. The repositioning comes after the Reserve Bank was less dovish than expected when it cut the benchmark interest rate as expected this month but signalled there was a high hurdle for further cuts, while the Federal Reserve hiked its rate as expected but signalled further increases would be gradual. 

Still, the BNZ expects the kiwi may fall as low as 60 US cents in the second half of 2016 as the New Zealand economy slows and the US economy improves, Martin said.

The New Zealand dollar hit a six-month high of 4.4659 yuan and was trading at 4.4540 yuan at 8am from 4.4548 yuan yesterday. It also touched a fresh six-month high of 46.49 British pence, and was trading at 46.35 pence from 46.08 pence yesterday.

The local currency gained to 62.85 euro cents from 62.55 cents yesterday, and edged up to 82.70 yen from 82.63 yen. It slipped to 94.14 Australian cents from 94.51 cents yesterday.

 

BusinessDesk.co.nz



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