NZ dollar climbs above 72 US cts as ECB minutes signal earlier end to stimulus

Friday 12th January 2018

The New Zealand dollar rose to a fresh three-month high after minutes to last month's European Central Bank policy review signalled an earlier end to its stimulus programme, weighing on the greenback.

The kiwi rose to 72.48 US cents as at 8am from 71.88 cents yesterday. The trade-weighted index advanced to 75.17 from 74.78 yesterday, rising to its highest level since mid-October.

The euro climbed 0.8 percent to US$1.2035 after minutes to the December ECB meeting showed European policymakers were considering how the region's “continued robust and increasingly self-sustaining economic expansion” would affect decisions, and that it could change its guidance for quantitative easing to continue until at least September. The change in tone from Europe's central bank follows a reduction in bond-buying from the Bank of Japan in what's becoming a broader shift away from the extraordinary stimulus injected into the global economy over the past decade.

"A more hawkish tone to the ECB minutes gave the euro a boost as markets digest what 'gradual shift' might mean. At face value, it implies the ECB is inching towards the exit door," ANZ Bank New Zealand chief economist Sharon Zollner said in a note. "The NZD/USD is on a tear. The break of key topside levels opens up the potential for further moves higher."

The kiwi was little changed at 60.21 euro cents from 60.14 cents yesterday, and ANZ's Zollner said the prospect of tighter monetary policy in Europe earlier than expected should cap the cross, which has support at 58.80 euro cents and faces resistance at 60.80 cents.

New Zealand's currency was also boosted by higher commodity prices, with Brent Crude oil rising above US$70 a barrel for the first time since 2014. Local data today include November building permits, which isn't typically market moving. Quotable Value figures yesterday showed the pace of rising property values almost halved in 2017 from a year earlier.

The kiwi gained to 4.7080 Chinese yuan from 4.6838 yuan yesterday after the Chinese government quashed speculation it was considering cutting its purchases of US Treasuries. The report triggered a sell-off in US Treasuries and the greenback yesterday.

The kiwi rose to 91.83 Australian cents from 91.37 cents yesterday and advanced to 53.54 British pence from 53.22 pence. It gained to 80.51 yen from 80.29 yen yesterday.

(BusinessDesk)

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