Dollar gains, benefiting from weakness in other currencies

The New Zealand dollar rose as investors look to exit currencies where central banks may continue with low interest rates and money printing programmes.

The kiwi rose to 78.98 US cents at 5pm in Wellington from 78.75 cents at 8am and 78.15 cents yesterday. The trade-weighted index advanced to 78.59 from 78 yesterday.

Investors have been winding back their holdings of yen, sterling and euro as central banks in those regions look likely to continue with ultra-loose monetary policy to either stir or maintain economic momentum. Australia's dollar has joined the global sell-off after Reserve Bank deputy governor Philip Lowe jawboned the currency, and weak iron ore prices stoked speculation the central bank may cut rates.

A key beneficiary has been the US dollar, which seems to benefit from rising interest rates next year, and the kiwi has attracted investors with its relatively high interest rates and strong economic growth. US markets are closed on Thursday for the Thanksgiving Holiday.

"For the past couple of weeks the kiwi has looked relatively good compared other currencies which are the whipping boys of the US dollar," said Raiko Shareef, currency strategist at Bank of New Zealand. "Everybody wants to sell against the yen, sterling and euro, and more recently against the Aussie on the iron ore prices, and the kiwi has been supported on the crosses."

BNZ's Shareef said he is "slightly less bearish in the near term" with the currency likely to trade between 78 US cents and 80 cents for the next couple of weeks.

New Zealand figures today showed the trade balance fell to an annual deficit of $107 million in October, its first yearly shortfall since December, though exports grew at a faster pace than imports.

Reserve Bank of New Zealand data showed the central bank wasn't active in currency markets in October, with net sales of just $1 million. That coincided with a technical breach of a key level in the Australian dollar, which saw a brief spike in the kiwi dollar.

The local currency gained to 92.01 Australian cents at 5pm in Wellington from 91.51 cents yesterday, and advanced to 92.66 yen from 92.10 yen. It rose to 63.13 euro cents from 62.66 cents yesterday, and increased to 50.01 British pence from 49.76 pence.

(BusinessDesk)