Kiwi above 83 Aust cents – first time since 2009

The New Zealand dollar climbed above 83 Australian cents for the first time since October 2009 as investors look for increasing returns on this side of the Tasman ahead of next week's Australian central bank review.

The kiwi climbed to 83.02 Australian cents at 5pm in Wellington, near its 83.08 cents high, from 82.86 cents yesterday. The local currency rose to 85.22 US cents from 84.92 cents at 8am and 84.90 cents yesterday.

Investors have become more attracted to yields on offer in New Zealand as the local economic recovery gathers pace and as the Reserve Bank looks more likely to hike interest rates over the next year.

The yield on the New Zealand 10-year government bond was 3.18 percent at 5pm in Wellington, 13 basis points above its transTasman equivalent, even though Australia's target cash rate is higher than New Zealand's.

The Reserve Bank of Australia will review monetary policy next week and traders are increasingly expecting a rate cut some time this year, with 62 basis points of reductions priced in over the coming 12 months, according to the Overnight Index Swap curve.

That compares to pricing of 9 basis points of increases for the New Zealand central bank over the same time frame.

"A rate cut is starting to get more priced in, and from a commodity price point of view, agriculture and food prices have held up remarkably well", which benefits New Zealand's exports more than Australia, says Dan Bell, currency strategist at HiFX in Auckland.

"The kiwi/Aussie cross rate has been in an uptrend for a while and is reversing a lot of the losses it's had over the last few years."

Investors are waiting for US employment figures in Washington overnight, which are expected to show the world's biggest economy added about 140,000 jobs last month.

The local currency is heading for 0.6 percent weekly gain against the greenback. A BusinessDesk survey of strategists on Monday predicted it would trade between 83 US cents and 86 cents this week and was more likely to test the bottom of that range.

The kiwi rose to 65.18 euro cents from 64.46 cents yesterday after the European Central Bank cut its deposit rate a quarter-point to 0.5 percent as expected and left the door open for further reductions.

It rose to 54.88 British pence from 54.62 yesterday and advanced to 83.51 yen from 82.57. The trade-weighted index gained to 78.57 from 78.09 yesterday and is heading for a 0.2 percent weekly decline.

(BusinessDesk)