Kiwi holds above US79c as Budget looms

Friday 13th May 2011

The New Zealand dollar held above the US79c level today as commodity prices recovered and after yesterday's soft Australian jobs data.

At 5pm the NZ dollar was at US79.29c, down slightly from US79.56c at 8am but up from US79.12c at 5pm yesterday. It was at A74.55c from A74.62c at 8am and A74.35c at 5pm yesterday.

The NZ dollar peaked at a 12-week high around 0.56 euro on Thursday night, easing to 0.5582 euro at 5pm from 0.5563 at the same time yesterday.

Investors today noted an article by Reserve Bank of New Zealand governor Alan Bollard on the implications of the earthquakes in Canterbury for monetary policy.

Some economists said the statement was slightly hawkish but the main message was about low interest rates.

"It is likely that the official cash rate remains on hold until these downside risks pass and the economy begins to recover," Bollard said.

Minds are also turning to next week's New Zealand Government Budget and how it will be viewed by credit rating agencies.

The Budget is expected to be frugal and not a typical election year document.

"Aside from the issue of whether the credit rating can be maintained, there is unlikely to be much in this Budget to attract the market's attention," Westpac said in a preview.

BNZ currency strategist Mike Jones said the NZ dollar had been the strongest performing currency yesterday and overnight.

Factors behind that strength included a recovery in commodity prices, bolstering sentiment toward commodity currencies such as the NZ dollar.

Another factor was sharp gains by the NZ dollar against the aussie, after soft Australian job figures yesterday saw Australian markets trim chances of a June hike in Australian interest rates.

The NZ dollar was at 63.87 yen at 5pm from 64.21 yen at the same time yesterday. It was at 68.65 on the trade weighted index from 68.51 yesterday.

NZPA

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