Dollar rises after Chinese equity gains boost optimism

The New Zealand dollar rose after a gain in Chinese equities boosted optimism, pushing global sharemarkets and commodities higher.

The kiwi increased to 63.48USc at 8am in Wellington, from 62.76USc at 5pm yesterday. The trade-weighted index rose to 69.09 from 68.49 yesterday.

Global equity markets gained and commodity markets rallied overnight, triggered in part by a late surge in Chinese equities, amid optimism China's government will act to support its flagging economy. That boosted investor appetite for currencies from commodity-producing countries such as the kiwi, Aussie, Norwegian krone and Canadian loonie, and saw them reduce holdings of lower-risk currencies such as the yen and the Swiss franc.

"A rebound in the Chinese equity market and rebound in key commodity prices helped lift the mood in markets generally," Bank of New Zealand senior market strategist Kymberly Martin said in a note. "In this backdrop, the 'commodity-linked' Aussie dollar, New Zealand dollar,Norwegian krone and Canadian loonie were the strongest performers. By contrast, improved sentiment resulted in the 'safe-haven' Japanese yen and Swiss franc being shunned."

BNZ's Ms Martin said the kiwi has support at 62.50USc and faces resistance above 64USc.

In New Zealand today, the Real Estate Institute is expected to publish its latest data on August property sales. The main focus of the week is the Reserve Bank's decision on interest rates tomorrow, with governor Graeme Wheeler expected to reduce the benchmark rate a quarter point to 2.75%.

In the US, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota is scheduled to speak on the outlook for US monetary policy at a gathering in Evanston, Illinois. This is the last scheduled speech by a member of the Federal Open Market Committee before its September 16-17 meeting.

Elsewhere, the Bank of Canada is scheduled to review interest rates today, with no change expected.

The New Zealand dollar advanced to 90.32Ac from 90.17Ac yesterday. In Australia today, traders will be eyeing the latest monthly Westpac consumer confidence survey. Reserve Bank of Australia deputy governor Philip Lowe is due to speak at a Committee for Economic Development of Australia event in Melbourne, while assistant governor (financial markets), Guy Debelle is scheduled to deliver a briefing on FX Global Code of Conduct in London.

The kiwi jumped to 56.68 euro cents from 55.97 cents yesterday, increased to 41.23 British pence from 40.9p7, rose to ¥76.12 from ¥74.72 and gained to 4.0409 yuan from 3.9961 yuan.

(BusinessDesk)