Kiwi falls but outlook upbeat

  • 30/12/2015
Kiwi falls but outlook upbeat

By Jonathan Underhill

The New Zealand dollar has fallen from an 11-week high but is seen resuming its upward trend as the nation's relatively appealing interest rates attract investors.

The kiwi traded at US68.55 cents as at 5pm today in Wellington, having earlier risen as high as US68.86c, from US68.69c late yesterday.

The trade-weighted index fell to 74.39, having earlier reached a six-month high of 74.57 and from 74.50 yesterday.

With few central banks other than the US Federal Reserve talking about raising interest rates, New Zealand's official cash rate of 2.5 percent is a standout in a world where rates in the US, Europe, the UK and Japan are below 1 percent. While the Fed's tightening bias may eventually lift the greenback and some traders still expect a further cut from the Reserve Bank of New Zealand, for now the yield differential is favouring the kiwi.

"The kiwi is a pretty good place to be," said Kevin Morgan, senior dealer at OMF. "There's a lack of anticipation of upward movement by any central bank other than the Fed."

Mr Morgan said the New Zealand dollar would face technical resistance if it broke above US69c, a level it hasn't breached since June. If it does breach US69c, it could rise to between US71c and US72c, he said.

The local dollar has also been helped by a recovery in commodity prices. The Thomson Reuters/Core Commodity CRB Commodity Index has gained from its lowest levels in more than 13 years.

Today, the New Zealand dollar fell to 4.4468 yuan from 4.4548 yuan yesterday. It edged up to 46.19 British pence from 46.08p and rose to 62.70 euro cents from 62.55c. It fell to 82.56 yen from 82.63 yen and declined to 94.06 Australian cents from A94.51c.

The two-year swap rate was unchanged at 2.84 percent and 10-year swaps were at 3.74 percent.