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NZ dollar holds gains as risk appetite grows, RBNZ statement awaited

Monday 8th March 2010

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The New Zealand dollar held its gains from Friday in New York, when better-than-expected US jobs data and optimism over a rescue for Greece stoked investors’ risk appetite.

US government figures showed the world’s biggest economy lost fewer jobs than expected last month, with US non-farm payrolls report showing a drop of 36,000, compared with a forecast 68,000. The Standard & Poor’s 500 climbed 1.4% on Friday. Meantime, German Chancellor Angela Merkel said her Greek counterpart didn’t ask for any financial help at a meeting between the two leaders, stoking optimism Greece will be able to claw out of its fiscal hole. Locally, the central bank’s monetary policy statement due on Thursday, while expected to keep rates on hold, comes with the risk that Governor Alan Bollard will signal an even slower resumption of rate hikes this year.

Rising global stocks and more upbeat economic signals “saw investors ditch safe-haven currencies” such as the greenback and the yen in favour of “global growth-sensitive currencies” such as the kiwi, said Mike Jones, currency strategist at Bank of New Zealand, in a report.

Bollard is likely to “stay on message” in his MPS, reiterating a mid-year start to tightening. “Still, “any dovish undertones from the RBNZ intimating a later start would provide clear headwinds” for the kiwi.

The kiwi dollar recently traded at 69.44 US cents, having pushed toward 70 cents in New York on Friday. It ended the week in local trading below 69 cents.Against the Australian dollar, the kiwi traded at 76.56 Australian cents, down from 76.75 cents on Friday. It weakened to 49.85 British pence from 46.03 pence and traded at 62.79 yen from 62.91. The traded-weighted index of the kiwi dollar was at 64.30, from 64.49.

Bollard is likely to reiterate his view that tightening can occur around the middle of the year as the economy continues its tepid recovery with little inflation. No change in the OCR is the view of all 16 economists in a Reuters survey, with 15 of them tipping a higher interest rate by June 30.

Businesswire.co.nz

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