Tuesday 23rd July 2013
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The New Zealand dollar gained as the Group of 20 nations signalled a preference for growth over austerity, bolstering demand for emerging market currencies.
The kiwi rose to 79.58 US cents from 79.32 cents at the 5pm market close in Wellington yesterday. The trade-weighted index edged up to 75.15 from 75.08 yesterday.
The New Zealand dollar tracked so-called emerging market currencies up after the G20 nations pledged at a meeting in Moscow at the weekend to put growth before austerity, seeking to revive a global economy that they said "remains too weak". Federal Reserve chairman Ben Bernanke's comments in May that the US central bank may start to wind down its US$85 billion in monthly bond purchases has sparked a sell off in emerging markets.
The G20 position "will keep things like the US dollar weaker and things like the kiwi dollar and the Aussie dollar will be more attractive again," said Kevin Morgan, senior dealer at OM Financial. "This week we will see potentially further US dollar weakness which should send the kiwi just up to the top of the range of about 80 cents. It's going to be a tough nut to get above 80 cents."
The G20 nations accounts for 90 percent of the world economy and two-thirds of its population, many living in the large emerging economies at greatest risk of a reversal of capital inflows that have been one of the side effects of the Fed stimulus.
A report in the US yesterday showing existing home sales fell 1.2 percent in June, compared with expectations for a 1.4 percent gain, raised uncertainty about the US housing recovery and is helping support a stronger local currency against the greenback, strategists say.
The New Zealand dollar edged up to 86.09 Australian cents from 85.99 cents yesterday, and gained to 60.42 euro cents from 60.33 cents. The kiwi was little changed at 51.86 British pence from 51.88 pence yesterday, and also little changed at 79.27 yen from 79.33 yen yesterday.
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