Dollar heads for 3.7% gain vs. greenback as traders reassess Fed rate hike bets

The New Zealand dollar is heading for a 3.7 percent gain this week as investors reassess their bets on when the Federal Reserve will start hiking interest rates, and calmer global markets stoke demand for riskier assets such as equities and commodities.

The kiwi rose to 66.74 US cents at 5pm in Wellington from 64.34 cents on Friday in New York last week. It was little changed from 66.61 cents at 8am, and up from 66.05 cents yesterday. The trade-weighted index advanced to 71.52 from 71.04 yesterday, and is heading for a 2.5 percent weekly gain.

The Dollar Index, a measure of the greenback against a basket of currencies, is heading for a 0.6 percent weekly decline as less robust economic data prompted traders to revisit their bets on when the Federal Open Market Committee will shift from the zero-rate monetary policy it's run since December 2008. Minutes to the FOMC's last meeting showed policymakers deemed the world's biggest economy is almost in good enough shape to warrant a hike, but held off for more evidence of a return to normality and to assess a wayward global economy.

"People have reorganised their positioning for a delayed Fed - that doesn't mean the US dollar trend has completely changed," said Martin Rudings, senior deal foreign exchange at OMF in Wellington. "There's some thought that the US dollar weakness will persist to the mid-67s as a possible cap, but I still quite like to sell the kiwi on rallies."

Another gain in dairy prices at this week's GlobalDairyTrade auction has also supported the kiwi dollar, and helped the local currency press higher against its Australian counterpart, which has faced languishing iron ore prices. The kiwi slipped to 91.69 Australian cents at 5pm in Wellington from 91.83 cents yesterday, and rose to 4.2377 Chinese yuan from 4.1819 yuan.

Government data today showed retail spending on credit and debit cards rose 1.2 percent in September, led by increased expenditure on durable goods such as furniture, hardware and appliance retailing.

New Zealand's two-year swap rate increased one basis point to 2.71 percent at 5pm in Wellington and the 10-year swap rose three basis points to 3.55 percent.

The local currency climbed to 80.04 yen at 5pm in Wellington from 78.96 yen yesterday, and advanced to 59.15 euro cents from 58.52 cents. It climbed to 43.92 British pence from 43.02 pence yesterday.

(BusinessDesk)