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NZ dollar trades above 70 US cents

NZ NewswireNZ Newswire 19/04/2016 Jonathan Underhill

NZ dollar trades above 70 US cents © REUTERS/David Gray/Illustration NZ dollar trades above 70 US cents The New Zealand dollar rose above 70 US cents for the first time since June last year amid speculation the Federal Reserve won't rush to raise interest rates and the Reserve Bank won't hurry to cut its benchmark rate.

The Kiwi rose as high as 70.02 US cents and traded at 69.97 cents as at 5pm on Tuesday from 69.21 cents late on Monday. The trade-weighted index reached 73.50, matching the level it reached on February 26, from 73.06.

The Kiwi has joined the Australian and Canadian dollars in rallying as prices rose for commodities, including iron ore and copper while crude oil recovered.

Recent Chinese data including trade and economic growth has provided reassurance to financial markets that demand for raw materials won't collapse in the world's second-largest economy. By contrast, US economic data may be weak enough to slow any move by the Fed.

"It is looking like we're going to see pretty weak first-quarter GDP in the US and that's taken out the likelihood of a Fed rate hike in the second quarter," said Angus Nicholson, a market analyst at IG Markets.

By contrast, stronger inflation data in New Zealand means "there's a bit less pressure for the Reserve Bank to follow up with back-to-back cuts and makes a reasonable case for it to hold off."

Mr Nicholson said that by waiting until June to cut the official cash rate, the Reserve Bank will give itself more time to assess how the economy is tracking.

The trade-weighted index is currently well above the 70.9 level the central bank forecast in its March monetary policy statement. But Mr Nicholson said the drivers pushing the kiwi up "are far beyond the RBNZ's control".

"Like the Australian dollar, the Kiwi is at the whim of the Fed and global markets," he said.

The New Zealand dollar traded at 89.97 Australian cents from 90.18 cents on Tuesday and was little changed at 48.91 British pence from 48.83 pence. It gained to 61.79 euro cents from 61.31 cents and rose to 76.30 yen from 74.76 yen. The Kiwi rose to 4.5292 yuan from 4.4838 yuan.

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