Dollar gains as equities climb

Wednesday 19th August 2009

The New Zealand dollar climbed back over 67 US cents as stocks markets gained on better-than-expected earnings from US retailers and a German sentiment survey that showed growing confidence in Europe’s largest economy.

Home Depot and Target Corp. surprised the market after they separately announced cost-cutting measures had offset weak sales and boosted their quarterly earnings.

Germany’s ZEW survey of economic expectations climbed to 56.1 this month, the highest level since April 2006, boosting the prospect Europe’s economy won’t decline as much as earlier anticipated.

The change in sentiment stoked investors’ appetites for higher-yielding, or riskier, assets and helped lift the kiwi back over 67 US cents.

“It’s volatile – investors have no problem backing out at the first sign of trouble, but they also have no problem hitting the buy button,” said Khoon Goh, senior markets economist at ANZ National Bank. “Earlier this week we had risk off the table, now it’s firmly back on.”

The kiwi climbed to 67.44 US cents from 66.98 cents yesterday, and advanced to 63.10 on the trade-weighted index, or TWI, a measure of the currency versus a basket of partners, from 62.75.

It increased to 81.62 Australian cents from 81.26 cents yesterday, and rose to 47.76 euro cents from 47.43 cents. It gained to 63.93 yen from 63.65 yen yesterday.

Goh said the currency may trade between 66.90 US cents and 67.70 cents today as it continues to take its cues from across the ditch and from equity markets.

Reserve Bank of Australia Assistant Governor Malcolm Edey and Australian Treasury Secretary Ken Henry will deliver speeches today, and investors will be looking to see whether they give any hint as to when the central bank might start tightening monetary policy.

“It’s quite clear that the next move will be to hike interest rates – what everyone is unsure of is the timing – will be it before Christmas or pushed out to next year?” Goh said.

New Zealand’s producer price index for the second quarter will be released today by the government statistician.

Businesswire.co.nz

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