NZ dollar holds above 72 US cts as stocks on Wall St extend rally

Friday 6th November 2009

The New Zealand dollar held above 72 U.S. cents amid after stronger U.S. productivity data helped lift stocks on Wall Street and stoked investors’ appetite for higher-yielding, or riskier, assets.

The Dow Jones Industrial Average climbed 2.1% as worker output in the third quarter climbed at an annual pace of 9.5%, according to government data. Still, currency markets didn’t keep pace with equities, suggesting the close ties between risk appetite and commodity currencies such as the kiwi dollar may be diminishing. Employment data in the U.S. is expected to show the American jobless rate climbed to 9.9% last month.

The kiwi climbed to 72.10 U.S. cents from 71.77 cents yesterday, and increased to 64.91 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 64.55. It jumped to 65.44 yen from 64.61 yen yesterday and declined to 79.22 Australian cents from 79.31 cents. It was little changed at 48.47 euro cents from 48.43 cents yesterday and recently traded at 43.47 pence from 43.46 pence.

“The Dow was the big theme overnight, but currency markets didn’t really follow on,” said Philip Borkin, economist at ANZ National Bank. “It suggests the market is looking tired and there are still concerns around that there could be some more correction to come.”

Borkin said the currency may trade between 71.55 U.S. cents and 72.55 cents as markets wait for the American employment data out today in the U.S.

“Labour market data is often very volatile and has the potential for surprises,” he said. “When we get one, the markets react quite aggressively to them.”

New Zealand’s central bank Governor Alan Bollard stressed the differences between the trans-Tasman economies, and said “if financial markets can’t see the differences, they will eventually lose money, and it will hurt the New Zealand economy.”

Meanwhile, the European Central Bank President Jean-Claude Trichet and Bank of England Governor Mervyn King both signaled they will slow down their stimulus measures.

The Reserve Bank of Australia will today give its monetary policy statement to policy makers.

Businesswire.co.nz

Comments from our readers

No comments yet