Dollar hits 11-month high as risk appetites rise

Tuesday 8th September 2009

The New Zealand dollar hit an 11-month high amid expectations policy makers will keep extraordinary stimulus measures in place to lift the globe out of its deepest recession since World War II, helping stoke investors' appetites for risk.

Stocks in Asia and Europe gained yesterday after finance ministers at the Group of 20 nations in London reaffirmed their commitment to policy measures put in place to revive the world economy.

The Nikkei 225 gained 1.3% to 10,320.94 in trading yesterday and Europe’s Dow Jones Stoxx 600 climbed 1.4% to 237.20. The kiwi dollar broke the 69 US cents level on its ninth attempt in about three weeks in London trading. Markets in the US were closed for a public holiday.

“Sentiment in Asian markets flowed from the G-20 meeting on the weekend – while there was a lot of talk about regulation, comments from officials that they weren’t withdrawing stimulus was the main driver in currency markets,” said Philip Borkin, economist at ANZ National Bank. “The kiwi finally broke through the 69 US cents barrier, but failed to really push on.”

The New Zealand dollar was little changed at 69.24 US cents from 69.26 cents yesterday, and traded at 63.89 on the trade-weighted index, or TWI, a measure of the kiwi versus a basket of currencies, from 63.90.

It edged down to 64.37 yen from 64.40 yen yesterday and slipped to 48.28 euro cents from 48.30 cents. It was recently at 80.91 Australian cents from 80.93 cents yesterday.

Borkin said the currency may trade between 69 US cents and 69.50 cents today and will probably need some offshore news to break the range ahead of the Reserve Bank’s monetary policy statement on Thursday. “The risk is that it will push on higher” after the MPS, he said.

The pound came under pressure following reports Cadbury rejected a US$10 billion takeover offer from Kraft, while the Chamber of Commerce called for the Bank of England to cut its benchmark interest rate to zero to give the economic recovery greater stability.

The kiwi climbed to 42.36 pence from 42.17 pence yesterday, and Borkin said it looks like the cross-rate can push higher.

National Australia Bank’s survey of business confidence in Australia should give the market another indication that New Zealand’s closest neighbour is on well on the way to economic recovery.

Businesswire.co.nz

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