NZ dollar heads for 2.1 percent weekly gain vs. greenback

Friday 19th July 2013

The New Zealand dollar is heading for a 2.1 percent weekly gain against the greenback as investors pare their bets on the world's reserve currency in a week where US Federal Reserve chairman Ben Bernanke reiterated that the central bank is set on winding back its money printing programme.

The kiwi rose to 79.12 US cents at 5pm in Wellington from 77.50 cents last week, and was little changed from 78.97 cents at 8am and 78.61 cents yesterday. The trade-weighted index is heading for a 0.6 percent weekly gain, trading at 74.98 at 5pm from 74.65 yesterday and 74.52 last week.

A BusinessDesk survey of strategists and traders on Monday predicted the local currency would trade between 76 US cents and 79.50 cents this week. Four expected the New Zealand dollar would remain unchanged, five picked a decline, and only one forecast a gain.

Bernanke wrapped up his two-day testimony to legislators on Thursday in Washington, having said tapering the US$85 billion monthly bond buying programme wasn't "preset" and that rising yields on Treasuries were "unwelcome". Bernanke has been at pains to tell investors that the Fed will only start unwinding quantitative easing if the economic data stacks up.

"He's not making a signal that rate hikes are imminent, he's trying to keep his options open," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. "US yields have lowered a bit, the US dollar has eased a bit, and the kiwi has been able to drift a little bit higher."

Government figures today showed New Zealand reported a four-year high in the monthly net inflow of migrants, as fewer locals cross the Tasman amid Australia's slowing economy. The kiwi rose to 86.10 Australian cents from 85.69 cents yesterday.

Investors will be looking for Australia's inflation figures and the New Zealand Reserve Bank's monetary policy review next week for a steer on the trans-Tasman currencies. The neighbouring nations' central banks are on different interest rate paths, with Australia's Reserve Bank is seen as likely to cut rates and New Zealand's authority on a tightening bias.

The New Zealand dollar rose to 79.15 yen from 78.69 yen yesterday and gained to 60.21 euro cents from 60.01 cents. The local currency advanced to 51.92 British pence from 51.77 pence yesterday.

BusinessDesk.co.nz

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