Sharechat Logo

Dollar extends gains on strong Chinese export data and OCR hike

Friday 11th June 2010

Text too small?

The New Zealand dollar extended yesterday's gains as strong Chinese export data supported investors' return to higher-yielding, riskier assets after New Zealand's central bank tightened monetary policy, stoking demand for the kiwi currency.  

Chinese exports surged almost 50% last month compared to May 2009, helping stoke investor confidence in the global recovery, which has been driven by demand for raw materials in the world's third biggest economy.  

The European Central Bank helped allay investors' fears about the sovereign debt crisis facing the region, extending its three-month emergency loan facility until September.

The changing global environment encouraged traders to back so-called risk assets, such as the kiwi, that had already fallen into favour after the Reserve Bank of New Zealand hiked the official cash rate a quarter-point to 2.75%, and signalled a gradual return to normal monetary policy settings.  

"The kiwi has been the star currency with the strongest performance over the past 24 hours," said Mike Jones, strategist at Bank of New Zealand.

"Its yield advantage widened, and we've seen a bit more demand against a global backdrop that's more in the kiwi's favour with equity markets and commodity prices up stronger across the board."  

The kiwi climbed to a week-high 68.73 U.S. cents from 68.04 cents yesterday, and advanced to 66.84 on the trade-weighted index of major trading partners' currencies from 66.47.

It jumped to 62.75 yen from 62.06 yen yesterday, and was unchanged at 80.81 Australian cents. It increased to 56.61 euro cents from 56.37 cents yesterday, and edged up to 46.68 pence from 46.62 pence. 

Jones said the currency may trade between 67.80 U.S. cents and 69 cents today, and if it closes above the top end of the range, the recent down-trend will likely be over.  

"We'll probably see key markets take the kiwi a little higher today as the positivity flows into Asian equities," Jones said.

Chinese manufacturing and inflation data will be the focus for traders today, he said.  Australia's unemployment rate unexpected dropped to 5.2% last month, in a further indication that the trans-Tasman economies that have come through the global financial crisis in better states than their European and American counterparts, and underpinning support for the region.  

The Dow Jones Industrial Average Index climbed 2.8%, taking it back over 10,000 for the first time in a week.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar gains on G20 preference for growth
NZ dollar dips as Wellington CBD checked for quake damage
NZ dollar gains, bolstered by RBA minutes, strong dairy prices
NZ dollar falls after central bank says it may scale up currency intervention
NZ dollar gains before CPI, helped by dairy gains, rally on Wall Street
NZ dollar trades little changed as US budget talks bear down on deadline
NZ dollar falls with equities on view US to sail over fiscal cliff
NZ dollar weakens as fiscal cliff looms, long bets unwind
NZ dollar sinks to three-week low as equities fall, fiscal talks in focus
NZ dollar slips as fiscal cliff talks grind slower in Washington