NZ dollar rises as oil price gains bolster commodity currencies

Wednesday 27th January 2016

The New Zealand dollar rose along with other commodity-linked currencies as the price of oil rose on optimism production may be reduced.

The kiwi jumped to 64.99 US cents at 8am in Wellington, from 64.56 cents at 5pm yesterday. The trade-weighted index increased to 71.57 from 71.27 yesterday.

Commodity currencies such as the kiwi, Aussie and Canadian dollars advanced as oil prices gained, stoking investor appetite for riskier growth assets. Oil prices, which have been trading near their lowest in 13 years, were bolstered on optimism a deal might be secured to reduce the global glut after Iraq’s oil minister said Saudi Arabia and Russia — the world’s top oil producers — are now more flexible about cooperating to curb output.

"The rebound in oil prices drove an improvement in risk sentiment, leading to higher equity prices and commodity currencies," Bank of New Zealand currency strategist Jason Wong said in a note. "With the rebound in oil prices it comes as no surprise that the Canadian dollar is the best performing currency."

There was little reaction to a statement from ratings agency Fitch late last night downgrading New Zealand's sovereign rating outlook to stable from positive. The rating agency affirmed the AA rating, but revised the outlook to reflect lower export prices and weaker growth prospects.

In New Zealand today, Prime Minister John Key is scheduled to give a lunchtime speech to the Auckland Chamber of Commerce where he is expected to bring forward spending on the city's transport infrastructure.

The New Zealand dollar slipped to 92.66 Australian cents from 92.79 cents yesterday. Australia publishes fourth-quarter inflation data today, which is expected to show the pace slowed.

The local currency gained to 59.94 euro cents from 59.51 cents yesterday, and increased to 77.05 yen from 76.28 yen as investors eschewed so-called safe haven currencies.

The kiwi slipped to 45.31 British pence from 45.38 pence yesterday, and increased to 4.2773 yuan from 4.2469 yuan.

BusinessDesk.co.nz

Comments from our readers

No comments yet