NZ dollar touches fresh three-year high as Fed minutes fail to signal interest rate rises

Thursday 10th July 2014

The New Zealand dollar touched a fresh three-year high and is edging closer to its a post-float record after some traders were disappointed the Federal Reserve's June meeting minutes didn't signal the potential for US interest rate hikes.

The kiwi touched 88.29 US cents, its highest since August 2011 when it reached a post-float record of 88.40 cents. The local currency was trading at 88.20 US cents at 8am in Wellington, from 87.93 cents at 5pm yesterday. The trade-weighted index rose to 81.89 from 81.72 yesterday, after touching a record 81.92.

The US dollar weakened after the release of the Federal Reserve meeting minutes at 6am New Zealand time failed to provide markets with any new information. Some traders had been expecting stronger employment data pointing to a revival in the world's largest economy could have prompted the Fed to mull hiking interest rates sooner.

"The minutes themselves were not insightful, there was nothing significantly new in them but the market immediately responded, pushing down interest rates in the US, pushing down the US dollar and therefore pushing up most currencies against the US," said Imre Speizer, senior market strategist at Westpac Banking Corp in New Zealand. "It suggests the market might have positioned itself for a hawkish report, didn't get a hawkish report and then quickly had to take back their speculative positions."

Westpac's Speizer said the kiwi has a chance of making a new post-float record high today but would need a catalyst such as this afternoon's Australia's employment report or Chinese trade data.

Also today, the BNZ-Business NZ Performance of Manufacturing Index is scheduled for release at 10:30am.

The New Zealand dollar increased to 64.62 euro cents from 64.56 cents yesterday after European Central Bank president Mario Draghi reiterated in a speech that the bank is ready use "unconventional instruments" if needed.

The kiwi gained to 51.40 British pence from 51.32 pence yesterday, rose to 89.60 yen from 89.34 yen and advanced to 93.65 Australian cents from 93.57 cents.

BusinessDesk.co.nz

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