Kiwi holds above 82 US cents, helped by good yields, relative strength

BUSINESSDESK: The New Zealand dollar held above 82 US cents as the nation's relatively high yields and economic growth stronger than in Europe or the US helps underpin demand for the currency.

The kiwi recently traded at 82.16 US cents from 82.21 cents on Friday in the US. The trade-weighted index was at 73.33 from 73.39.

It may rise this week on the relative appeal of parking funds in the local currency, according to a BusinessDesk survey today.

New Zealand 10-year bonds are yielding 3.56%, or 182 basis points more than comparable US Treasuries, and new Reserve Bank governor Graeme Wheeler last week appeared to rule out any easing in interest rates or intervention in the currency market.

The New Zealand and the Australian dollars "are a bit better supported by their better fundamentals and high yields", says Peter Cavanaugh of Bancorp Treasury Services. "It is looking increasingly like New Zealand has a less dire story to tell than the rest of the world."

Also helping stoke demand for the kiwi this week is the settlement on October 31 of the Debt Management Office's sale of $2.5 billion of 2025 inflation indexed bonds with a coupon of 2% and a real yield of 1.96%. That means offshore buyers, who may have scooped up $1.5 billion of the debt, would need to buy kiwi dollars to pay for it.

Traders are also looking ahead to the Bank of Japan decision tomorrow, which may ease monetary policy via a 10 trillion yen top-up to its asset purchase programme, according to Bank of New Zealand.

The kiwi recently traded at 65.45 yen from 65.46 yen in New York on Friday. It is near a recent high of about 69.70 last week, which was a six-month record.

It traded at 51.06 British pence from 51.11 pence on Friday in New York and bought 79.24 Australian cents after being 79.27 cents. It was at 63.51 euro cents from 63.54 cents earlier.