NZ dollar gains as equity market strength lifts risk appetite

Friday 2nd March 2012

The New Zealand dollar rose against most of its global peers as equity markets continued their ascent, helping stoke risk appetite and demand for currencies such as the kiwi and the Australian dollar.

The New Zealand dollar rose to 83.87 US cents from 83.50 cents at 5pm yesterday. The trade-weighted index rose to 73.85 from 73.57.

The Standard & Poor’s 500 Index climbed 0.6 percent while major benchmarks in Europe including the DAX 30, the CAC 40 and the FTSE 100 were up more than 1 percent.

Financial companies led gainers on Wall Street after government figures showed jobless claims have fallen to a four-year low. Retailers also posted improved sales though manufacturing growth in the US slowed.

The Australian dollar and to a lesser extent the kiwi took heart from Chinese manufacturing figures yesterday, which showed China's official purchasing managers' index (PMI) rose to 51.0 from 50.5 in January.

With rising equity markets “the kiwi and the Australian are pushing up again,” said Mike Hollows, director trading at HiFX.

“In a world that it pretty uncertain, Australasia still ticks some boxes and there’s a little bit of yield play going on,” he said.

With the US Federal Reserve keeping its benchmark interest rate near zero, New Zealand’s official cash rate of 2.5 percent and Australia’s 4.25 percent cash rate mean the nations’ rates are relatively attractive to global investors.

Hollows said there is room for the New Zealand dollar to push higher if equities extend their gains.

The kiwi “is knocking on the door yet again of 84 (US) cents,” he said.

The kiwi was little changed at 77.66 Australian cents from 77.63 cents and climbed to 62.99 euro cents from 62.59. The local currency rose to 68.04 yen from 67.68 and rose to 52.52 British pence from 52.44.

BusinessDesk.co.nz

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