NZ dollar rises from five-year low as investors weigh US outlook, Greece

Wednesday 24th June 2015

The New Zealand dollar rose from a five-year low as investors weighed up the outlook for the US economy and interest rate increases, and whether Greece will reach a compromise with its creditors and keep its place in the Eurozone.

The kiwi rose to 68.52 US cents from a low of 68.13 cents during the Northern Hemisphere session, and up from 68.50 cents yesterday. The trade-weighted index gained to 71.61 from 71.47 yesterday.

Stocks across Asia followed their European and US counterparts higher as investors considered mixed US economic data. Optimism that Greece will cut a deal with its international creditors took a knock after Germany said Greek parliamentary approval to an aid package was indispensable,amid reports of ructions on the hard left of Prime Minister Alexis Tsipras's Syriza party government.

"The markets are trying to decide how much they believe those various narratives that were in the markets overnight," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. "The net result is that we've ended up reversing the moves we've seen (in the kiwi) overnight."

The New Zealand dollar has been on a downward trend in recent months as the prospect of lower interest rates saps the lure of the currency. Reserve Bank governor Graeme Wheeler kicked off an easing cycle earlier this month, with a 25 basis point cut to the benchmark Official Cash Rate, based on concerns about the plunge in the terms of trade caused primarily by much lower dairy prices. Traders are pricing a further 46 basis points cut to the OCR over the coming 12 months, according to the Overnight Index Swap curve.

New Zealand's two-year swap rate increasd to 3.09 percent at 5pm in Wellington from 3.08 percent yesterday, while the 10-year swap rate advanced to 3.97 percent from 3.95 percent.

The local currency was little changed at 88.80 Australian cents from 88.88 cents yesterday, and increased to 4.2548 Chinese yuan from 4.2503 yuan. It climbed to 61.35 euro cents from 60.76 cents yesterday, and edged up to 43.54 British pence from 43.42 pence. The kiwi rose to 84.99 yen from 84.76 yen yesterday.

BusinessDesk.co.nz

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