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NZ dollar TWI heads for weekly gain

NZ NewswireNZ Newswire 1/07/2016 Paul McBeth
© Bloomberg

The New Zealand dollar is heading for a 1.4 per cent weekly gain on a trade-weighted basis as the country's distance from Europe and the UK and its attractive yield continue to reel in investors chasing better returns.

The trade-weighted index rose to 76.38 at 5pm from 75.30 on Friday last week and was up from 75.80 on Thursday.

Among the cross rate gains was a 2.9 per cent jump against the British pound to 53.60 pence from 52.11 pence a week ago, up from 52.88 pence on Thursday.

The Reserve Bank's 2.25 per cent official cash rate is a stand-out in a world where many central banks are keeping borrowing costs near zero and may provide further stimulus in response to the UK's vote to quit the European Union.

The yield on New Zealand's 10-year government bond was recently at 2.35 per cent, near a record low, though still more than the 1.45 per cent yield on US 10-year Treasuries, -0.11 per cent yield on EU bonds and -0.25 per cent yield for Japanese notes.

"There's ongoing demand for NZ Inc based on the fact we're as far as you can get from the UK and Europe and have better yields as well," said Tim Kelleher, head of institutional FX sales NZ at ASB Bank Institutional in Auckland.

Still, "the Kiwi looks like this bounce is corrective on the charts, so I think we've got a bout of 'risk-off' coming."

The Kiwi climbed to 71.47 US cents at 5pm from 70.86 cents on Thursday. US markets might be quieter than usual with the Independence Day holiday falling on Monday.

The local currency climbed to 95.70 Australian cents from 95.25 cents on Thursday ahead of the Federal election on Saturday. Polling shows the vote will be close, and ASB's Kelleher said he was surprised at how little attention the election has been attracting.

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