NZ dollar gains as market bets on Clinton victory, takes on riskier assets

Wednesday 9th November 2016

The New Zealand dollar rose to a two-month high, pushing above 79 on a trade-weighted basis, as investors bet Hillary Clinton will win the US presidential election, giving them more appetite to take on risk.

The kiwi traded at 73.65 US cents as at 8am in Wellington from 73.24 cents late yesterday. The trade-weighted index rose as high as 79.03 and was recently at 78.97, from 78.59 late yesterday.

The Reuters/Ipsos States of the Nation project has odds of 90 percent that Clinton will beat Donald Trump in the race for the White House, with the prospect of her winning 303 electoral college votes to Trump's 235, Reuters reported. The Chicago Board Options Exchange Volatility Index (VIX), known as Wall Street's fear gauge, fell to 18.59 from 22.51 last Friday, which was the highest since late June. The US election has overshadowed the Reserve Bank's rate cut expected tomorrow, with the TWI breaching 79 for the first time since early September.

"The NZD has edged higher as investors add to their risk portfolios in anticipation of a Clinton victory," analysts at HiFX said in a note. "A Clinton victory should see the NZD consolidate ahead of tomorrow’s RBNZ interest rate announcement, while a Trump victory will result in a massive risk-off shift resulting in a sharply lower NZD."

RBNZ governor Graeme Wheeler is expected to cut the official cash rate a quarter-point to a new record-low 1.75 percent tomorrow in what may be the last step in its easing cycle, although it may officially keep in place the prospect of a further cut to try to prevent the kiwi from rallying. The TWI is currently about 4 percent higher than the average level the bank projected in its August MPS.

The New Zealand dollar surged to 77.40 yen from 76.51 yen as traders eschewed the Japanese currency, typically a safe-haven currency. It rose to 59.43 British pence from 59.10 pence and was little changed at 95.16 Australian cents from 95.12 cents. It rose to 66.84 euro cents from 66.36 cents and gained to 5.0032 yuan from 4.9646 yuan, the first time in about two years it has exceeded 5.0000 yuan.

BusinessDesk.co.nz

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