The New Zealand dollar soared to a five-week high and is edging toward 87 US cents, after the Reserve Bank yesterday raised the benchmark interest for a third time this year and signalled plans for further hikes were intact, increasing the lure of the nation's currency.
The kiwi touched 86.99 US cents this morning, and was trading at 86.82 cents at 8am in Wellington, from 86.50 cents at 5pm yesterday and 85.50 cents before the Reserve Bank announcement at 9am yesterday. The trade-weighted index gained to 80.83 from 80.70 yesterday.
Investors have pushed up the value of the New Zealand dollar after gaining comfort from yesterday's monetary policy statement that interest rate rises would continue as the Reserve Bank indicated in its previous statement in March. Some had bet that governor Graeme Wheeler could soften the pace of his tightening cycle on concern about the effect of lower milk prices on economic growth. Higher interest rates in New Zealand are attractive to investors in an environment where many other major central banks are on a neutral or easing path.
"The New Zealand dollar was the outstanding performer," Kymberly Martin, senior market strategist at Bank of New Zealand, said in a note. " The market was clearly taken by surprise that the RBNZ did not soften its previous stance."
New Zealand's central bank is expected to deliver another two rate rises this year, according to a Reuters poll of economists taken after yesterday's decision. Nine of 13 economists expect the next rise to come in July.
The local currency faces resistance at 87 US cents with support approaching 86 cents, BNZ's Martin said.
In New Zealand today, the Real Estate Institute of New Zealand is expected to release its latest house price data, and the performance of manufacturing index and the food price index are also scheduled for publication.
In China, reports will be released on industrial production, fixed asset investment and retail sales while the US has the producers price index and consumer confidence. A report yesterday showed US retail sales were weaker than expected in May.
The kiwi rose to a 13-month high of 64.23 euro cents overnight, and was trading at 64.01 cents at 8am from 63.87 cents at 5pm yesterday. The local currency touched a month high of 51.64 British pence and was trading at 51.57 pence at 8am from 51.49 pence yesterday. The British pound was weakened by comments from UK Chancellor George Osborne that macro prudential policies may be introduced, implying interest rates at the Bank of England may be lower for longer.
The New Zealand dollar weakened to 92.14 Australian cents from 92.22 cents yesterday. The local currency was little changed at 88.28 yen from 88.29 yen yesterday ahead of the Bank of Japan meeting today where no change to policy is expected.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- Light rail the winner in latest Auckland Transport turnaround
- Auckland council puts debt issuing plans on ice over Brexit concerns
- Brexit aftermath: disdain, the elites, and the warning for conservative parties everywhere
- Companies Office rejects NZ First complaint over Silver Fern deal
- Will people voluntarily stop owning cars within 20 or 30 years?
Most listened to
- BNZ's Jason Wong says the movements in the currency market last week were some of the biggest in history
- CBL's Peter Harris on uncertain times in the UK insurance industry
- Govt performing an awkward political U-turn on foreign trusts. Rob Hosking with John Shewan and John Key
- Trade Minister Todd McClay says plans for an FTA with the EU will not be hindered by the Brexit
- Oxford University academic Malcolm McCulloch predicts the imminent death of the internal combustion engine