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Kiwi nears 4-week high as investors stay upbeat on US holiday

Tuesday 7th September 2010

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The New Zealand dollar rose near a four-week high as investors stayed optimistic after a strong flow of global data last week, while US markets were closed for Labor Day.

Markets supported so-called risk sensitive currencies such as the kiwi and Australian dollars as investors grew more bullish about dodging a double-dip recession with Wall Street closed for a public holiday.

Still, as American traders return after their summer break, US equities may start turning, with the month of September historically weak for higher-yielding assets.  

“September, historically, is even weaker than October, when you get all the crashes” and markets need a few more days of gains for the trend to bed in, said Imre Speizer, market strategist at Westpac.

“The next target is 73.50, which gives quite a bit of upside against my expectation – this break above definitely puts that view into question.”

The kiwi rose as high as 72.59 US cents from 72.36 cents yesterday, and recently traded at 72.28 cents. It was little changed at 67.07 on the trade-weighted index of major trading partners’ currencies from 67.11, and slipped to 60.85 yen from 60.93 yen. It fell to 78.81 Australian cents from 78.96 cents yesterday, and recently traded at 56.14 euro cents from 56.13 cents. It edged down to 46.93 pence from 47 pence yesterday.

Speizer said the currency may trade between 72.10 US cents and 72.60 cents today as it ebbs with offshore equities ahead of the London session, which will give more hints as to where the kiwi’s heading after thin trading yesterday.

The Reserve Bank of Australia will review its target cash rate today, and Governor Glenn Stevens is expected to hold the rate at 4.5%. The Australian dollar might shift if a new government is announced today, with a Labor-led minority administration looking the most likely outcome.

The Bank of Japan’s two-day rate ends today, and is expected to see rates held at 0.1%, though it isn’t tipped to expand its liquidity measures any further after it added 10 trillion yen to its low-interest loan programme. The yen was unchanged at 84.19 per US dollar.

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