The New Zealand dollar recovered most of the ground it lost after Reserve Bank Governor Alan Bollard held the official cash rate at 2.5 percent, on optimism the global economic outlook is improving.
BUSINESSDESK: The New Zealand dollar recovered most of the ground it lost after Reserve Bank Governor Alan Bollard held the official cash rate at 2.5 percent, on optimism the global economic outlook is improving.
The kiwi rose to 81.81 US cents from 81.52 cents after Bollard’s announcement and was up from 81.59 cents yesterday. The trade-weighted index increased to 72.65 from 72.50.
Bollard tried to talk down the kiwi in today’s monetary policy statement, saying its recent strength was a drag on the tradable sector because it limited local manufacturers’ ability to compete with rival imports. The bank now forecasts the consumer price index to bottom out in the September quarter at 1.4 percent.
The bank pushed out its forecast track for the 90-day bank bill rate, often seen as a proxy for the OCR. Economists are now picking December as the earliest time for a rate hike when the Canterbury rebuild starts ramping up, stoking economic growth.
“Although it doesn’t feel that great in terms of recovery, New Zealand stands up pretty well relative to its global peers,” said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. “The things which got the currency where it is remain in place” and the kiwi’s strength should continue, he said.
The central bank lifted its forecast for the kiwi dollar, and now sees the TWI holding above 70 until the December quarter next year. The Reserve Bank had previously expected the TWI to fall to 65 from 67 over that period.
CBA’s Tennent-Brown said he expects the TWI will be higher than the Reserve Bank’s forecast, which will damp inflation further during this year.
The currency rallied in the Northern Hemisphere session after the United States added 216,000 private sector jobs last month, according to the ADP report. That comes in the lead-up to Friday’s non-farm payrolls, which will show 210,000 jobs were added in the world’s biggest economy, according to a Bloomberg survey.
The kiwi was little changed at 62.14 euro cents from 62.09 cents yesterday and increased to 51.96 pence from 51.87 pence.
It rose to 66.45 yen from 65.93 yen, and slipped to 77.22 Australian cents from 77.34 cents yesterday.
