You are using an older browser version. Please use a supported version for the best MSN experience.

NZD up as surplus gives short-term boost

NZ NewswireNZ Newswire 25/05/2016 Jonathan Underhill

NZD up as surplus gives short-term boost © Daniel Acker/Bloomberg News NZD up as surplus gives short-term boost The New Zealand dollar gained as a stronger-than-expected trade surplus gave the kiwi a short-term boost while traders mulled the prospects of a US Federal Reserve interest rate hike as soon as next month.

The kiwi rose to 67.56 US cents as at 5pm in Wellington, having climbed as high as 67.63 cents after the trade data, from 67.19 cents on Tuesday. The trade-weighted index rose to 72.84 from 72.48.

New Zealand posted a trade surplus of $292 million in April, more than the $60m expected in a Reuters poll and up from $184 million a year earlier, as gold kiwifruit and apples drove up exports.

The kiwi initially rose before shedding some of its gains but commodities will come back into focus on Thursday, when Fonterra is expected to give its first forecast for the 2017 milk payout.

"There was an initial reaction to the trade balance which then dissipated," said Alex Hill, head of corporate foreign exchange at NZ Forex. There is "still fairly muted betting" on a Fed rate hike in June, which has a 34 per cent chance, based on the overnight interest rate swaps market, rising to 54 per cent in July and 80 per cent by February next year.

NZ Forex sees a higher probability of a hike in June, rating it closer to a 45 per cent prospect. The Fed "realises they have to, it is just a question of when," Hill said.

Traders don't expect fireworks in Budget 2016, released at 2pm in Wellington, with Finance Minister Bill English promising a "solid, predictable budget".

Ahead of that release, Fonterra may announce its opening forecast for the 2017 season after the completion of a two-day board meeting. A BusinessDesk survey of analysts predicts a forecast payout of at least $4.43 per kilogram of milk solids, up from the current season's $3.90/kgMS.

The local currency gained to 60.54 euro cents from 59.92 cents and fell to 46.19 British pence from 46.37 pence. The New Zealand dollar rose to 74.22 yen from 73.43 yen and increased to 4.4273 Chinese yuan from 4.4028 yuan. It gained to 93.68 Australian cents from 93.36 cents.

The two-year swap rate rose a basis point to 2.30 per cent and the 10-year swaps rose 2 basis points to 2.91 per cent.

image beaconimage beaconimage beacon