Kiwi rebounds as interest rates attract

The New Zealand dollar extended gains against the greenback overnight, as the allure of favourable interest rate differentials continued to hook investors into the local currency.

The kiwi recently traded at US83.73 cents, up from US83.56c at 5pm yesterday, while on the Trade Weighted Index of major trading partners' currencies it was unchanged at 75.20.

BNZ currency strategist Mike Jones said the kiwi's gains over the last 24 hours were more closely linked to improving bond yields than they were to yesterday's better-than-expected trade surplus.

"Higher interest rates in New Zealand relative to offshore has had the effect of increasing the allure of the kiwi dollar, and so the kiwi's kind of shaken off its Monday-itis and rebounded back almost to US83.80c," he said.

With more upside for the kiwi in sight, Jones said it was likely to push past the US84c mark again.

The US Federal Reserve concludes its two-day meeting tomorrow morning, which will determine whether it keeps interest rates on hold and maintains its heavy stimulus of buying US$85 billion of bonds each month.

US GDP figures are also due out, and could cause headwinds for the greenback if they match forecasts of weakness.

On the crosses, the New Zealand dollar recently traded at 79.98 Australian cents, down from A80.09c at 5pm yesterday, and eased to 75.98 Japanese yen from 76.02 yen earlier. The kiwi opened at 62.09 euro cents, little changed from 62.12 yesterday, and rose to 53.15 pence from 53.01p earlier.

- © Fairfax NZ News