NZ dollar rises as greenback falls on outlook for weak oil prices

The New Zealand dollar rose on expectations that continued weakness in oil prices is reducing the likelihood of further US interest rate hikes, which affects the greenback.

The kiwi gained to 66.35USc at 8am in Wellington, from 65.88USc at 5pm yesterday. The trade-weighted index increased to 72.28 from 71.89 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, touched its lowest in more than three months. The International Energy Agency lowered its forecast for oil demand this year amid a global glut and record stockpiles. Federal Reserve officials indicated in December that they expected to hike rates four times this year. However, the market now prices just one further 25 basis point rate hike over the next two years.

"The International Energy Agency's February report provided little to boost sentiment toward the ailing global oil price," Bank of New Zealand senior market strategist Kymberly Martin said in a note. "With generally weak sentiment prevailing, it was not surprising to see the 'safe haven' Swiss franc as the best performer. The Japanese yen also remains in favour, as is common during turbulent times."

The New Zealand and Australian dollars rebounded this morning, "a move seemingly based on positioning rather than fundamentals," Ms Martin said.

The kiwi faces resistance at the 200-day moving average at 67USc, she said.

Tonight, the focus will be on Fed chairwoman Janet Yellen's scheduled appearance before the House Financial Services Committee, where she will deliver her semi-annual Humphrey Hawkins testimony.

"There is not too much Mrs Yellen could say to further reduce market expectations for Fed activity, given how low they already are," Martin said.

In New Zealand today, electronic card spending for January is published at 10:45am. Australia has consumer confidence data. The Chinese market is closed during the New Year holiday period.

The New Zealand dollar rose to 94.05Ac from 93.58Ac yesterday, advanced to 45.94 British pence from 45.66 pence, increased to 76.18 yen from 75.47 yen, gained to 4.3599 yuan from 4.3290 yuan. It was unchanged at 58.75 euro cents.

(BusinessDesk)