NZ dollar squeezes higher after Fed minutes hold no new clues on rate track

The New Zealand dollar rose after minutes to the last Federal Reserve policy meeting showed an interest rate hike was still on the cards next month without offering more guidance, prompting some traders to cash in on their bets on the greenback.

The kiwi gained to 65.31 US cents at 5pm in Wellington from 64.35 cents at 8am, and up from 64.65 cents yesterday. The trade-weighted index advanced to 71.15 from 70.77 yesterday.

The US dollar index, a measure of the greenback against a basket of currencies, fell from an eight-month high after minutes to the Federal Open Market Committee reaffirmed investors' expectations for higher interest rates next month. The greenback gained about 6.1 percent since the October meeting on the prospect of the US's zero interest rate policy coming to an end, and some investors took the opportunity to cash in those gains after the minutes stuck to the official statement last month.

"People have been pushing the US dollar higher all through this week, especially against the euro and kiwi, pretty much holding their positions going into the minutes," said Raiko Shareef, currency strategist at Bank of New Zealand in Wellington. "This is a bit of short-term consolidation for the US dollar - the kiwi has been an out-performer, but I'd expect sellers to come through."

Government data today showed New Zealand producer prices rose in the September quarter, with output prices increasing at a slower pace than input prices as manufacturers were hit by higher import costs from a weaker currency.

The New Zealand government today sold $200 million of 2027 bonds paying annual interest of 4.5 percent at a an average yield of 3.61 percent. The tender attracted bids totalling $361 million.

New Zealand's two-year swap rate increased one basis point to 2.73 percent at 5pm in Wellington, and 10-year swaps rose three basis points to 3.61 percent.

The kiwi gained to 80.44 yen from 79.74 yen yesterday after the Bank of Japan kept interest rates near zero and affirmed its asset buying programme, as expected.

The local currency was little changed at 91.15 Australian cents from 91.09 cents yesterday, and increased to 4.1650 Chinese yuan from 4.1263 yuan. It advanced to 60.99 euro cents from 60.80 cents yesterday, and increased to 42.71 British pence from 42.54 pence.

(BusinessDesk)