Kiwi gains against greenback
The New Zealand dollar is up against the greenback as rate hikes forecast by the Reserve Bank of New Zealand draw closer.
The kiwi was trading at US82.97c this morning, up from US82.16c at 5pm on Friday.
OM Financial senior foreign exchange and derivatives advisor Stuart Ive said part of the reason for the lift in the New Zealand dollar was market speculation about the upcoming interest rate announcement from the Reserve Bank on January 30.
The Reserve Bank had been "bullish" about the New Zealand economy regardless of whether it raised rates from the present 2.5 per cent at the end of the month, Ive said.
"The economy here is almost verging on a tiger economy," he said.
The market consensus was that the Reserve Bank would hike rates by March.
Ive said the New Zealand dollar did well to hold above the crucial support level of US81.30c during the soft holiday period, adding that now the kiwi would be looking for some "hard numbers".
Weaker-than-expected US services industries data released overnight added to the kiwi's strength, he said, and the New Zealand dollar would now be moving towards US83.85c.
The next major market-moving economic data for New Zealand would be the Consumer Price Index (CPI) due out on January 21, Ive said.
The CPI for the December quarter would be a good indicator of what the Reserve Bank was likely to do in terms of possible rate hikes.
Ive said he expected the kiwi to trade between US82.70c and US83.20c today.
Janet Yellen, the first woman to head the US Federal Reserve, was due to be voted in by the Senate today.
If confirmed, the 67-year-old would succeed Ben Bernanke, whose second four-year term ends on January 31.
The New Zealand dollar was also elevated against the aussie as a similar story played out across the ditch.
The kiwi was trading at A92.53c this morning, up from A91.89c at 5pm on Friday.
Ive said that while the Reserve Bank of New Zealand was likely to raise interest rates, the Reserve Bank of Australia could cut rates further from 2.5 per cent.
"At best they are on the fence, at worst some people think they may cut rates this year," he said.
The Australian trade balance was due out today but it was unlikely to move markets, Ive said.
- Fairfax Media