NZ dollar higher as it finds some favor after heavy selling in recent months

Tuesday 28th November 2017

he New Zealand dollar gained against the Australian dollar and the greenback as it found some renewed favor among investors after being sold down on local political concerns over the past few months.

The kiwi traded at 69.26 US cents as at 5.00pm in Wellington versus 69.04 US cents as at 8am in Wellington and from 68.62 cents late yesterday. It was at 91.08 Australian cents from 90.23 cents late yesterday.

Mark Johnson, a senior dealer at OMF, said the market had been very "short" kiwi, wagering the currency would fall. However, those bets "have been exhausted," he said. The kiwi has fallen around 6 percent against the US dollar since the Sept 23 election on concerns the new government would derail the economy.

"A bit of a short squeeze higher makes perfectly good sense as those short positions unwind," he said. It seems to have resistance around the 69.20-69.25 level and Johnson said if it breaks that level it could push to 69.80.

Domestically markets will now be watching for tomorrow's financial stability report from the central bank, in particular acting governor Grant Spencer's testimony before a newly formed parliamentary select committee. The report and any commentary will be scrutinized for any signs of a plan to ease current curbs on mortgage lending.

Offshore, the Bank of England also presents its financial stability report and the results of the 2017 stress tests later in the global trading day. Markets will also be watching for a congressional hearing on US Federal Reserve chair nominee Jerome Powell and a possible Senate vote on US tax reforms. In remarks prepared for the congressional hearing, Powell endorsed a willingness to move aggressively against a downturn, and an insistence on flexibility and independence from political influence in setting policy.

The trade-weighted index rose to 73.03 from 72.35.

The kiwi rose to 58.18 euro cents from 57.54 cents and gained to 51.97 British pence from 51.53 pence. It rose to 4.5743 yuan from 4.5291 yuan and gained to 77.02 yen from 76.44 yen.

New Zealand's two-year swap rate fell 1 basis point to 2.15 while the 10-year swap rate fell 1 basis point to 3.11 percent.

(BusinessDesk)

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