Dollar hits 13-month high

Thursday 17th September 2009

The New Zealand dollar hit a 13-month high as it climbed over 71 US cents as investors’ appetites for higher-yielding, or riskier, assets rose amid rising stocks on Wall Street.

Investors continued to unwind their US dollar holdings as the prospect of the global economic recovery and rising stocks enticed them to seek out higher yields. The Dollar Index, a measure of the greenback versus a basket of currencies, slipped 0.2% as it tumbled to a 12-month low against the euro.

Stocks on Wall Street extended their rally for a second day after a Federal Reserve report showed US industrial production rose 0.8%.

“People who’ve kept their money in conservative money market funds are getting into equities,” said Imre Speizer, currency strategist at Westpac Banking Corp. The kiwi dollar is “not far off paring half of its entire decline from 2007, and equities have probably got another 5% before they get there”.

The kiwi jumped to 71.41 US cents from 71.25 cents yesterday, and has surged some 45% from its sub-50 cents low in March. It climbed to 64.86 on the trade-weighted index, or TWI, a measure of the currency versus a basket of five trading partners, from 64.73 yesterday and was little changed at 48.47 euro cents from 48.50 cents.

It advanced to 64.88 yen from 64.32 yen yesterday, and slipped to 81.62 Australian cents from 81.73 cents. Speizer said the currency may trade between 70.70 US cents and 72 cents today, and he expects it will rise above 72 cents this week as investors continue to look for higher yields. Next week he predicts it will attempt to break 74 cents.

Japan’s new Finance Minister Hirohisa Fujii reinforced market expectations the new Democratic Party-led government will tolerate a stronger yen, telling reporters in Tokyo recent currency movements “aren’t excessive” and stating his opposition to currency intervention. The yen weakened to 90.88 per US dollar from 90.29 yesterday.

Businesswire.co.nz

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