Kiwi up but gains seen capped
The New Zealand dollar surged overnight on the back of strong month-end activity from fund managers hedging their portfolios and on yesterday's hawkish Reserve Bank statement.
The kiwi recently traded at US84.20 cents, up from US83.48 cents at 5pm yesterday, while on the Trade Weighted Index of major trading partner' currencies it was unchanged at 75.20.
The Reserve Bank yesterday issued a surprisingly hawkish monetary policy statement whilst keeping the official interest rate on hold at its record low of 2.5 per cent.
That pushed the dollar up on the day and the momentum was sustained overnight.
ASB Institutional head of FX sales Tim Kelleher said the conclusion of a bumper January for equity markets had also caused some strong currency flows.
"All the fund managers do their portfolio reallocations at month's end in London, so there was a lot of buying of Aussie and Kiwi," he said.
"They have to readjust their hedges for the month-end to realign themselves with the benchmark they've set."
A speech from Reserve Bank governor Graeme Wheeler in Canterbury today could take on more of a dovish tone, particularly over the currency.
It comes a day after as many as 150 jobs were put on the line by the sale of an Oamaru wool plant, which has added to exporters and manufacturers' discontent over the high exchange rate.
On the crosses, the kiwi dollar recently traded at 80.62 Australian cents, up from A80.30c at 5pm yesterday, and 76.90 Japanese yen, up sharply from 75.83 yen.
It opened at 62.01 euro cents, up from 61.49 yesterday, and 53.08 pence, up from 52.80p yesterday.
Kelleher said the kiwi may be sold off around the US84.30c to US84.50c mark, as it has been at the conclusion of recent rallies.
"In the greater scheme of things, we're still just washing around between US83.50c and US84.50c."