NZ dollar pushes towards 75 US cents as stocks gain, US retail sales climb

Tuesday 17th November 2009

The New Zealand dollar pushed toward 75 US cents as stocks rallied on Wall Street and in Europe, and figures showed retail sales in America gained more than expected.

The Dow Jones Industrial Average gained 1.3% and Europe’s Dow Jones Stoxx 600 advanced 1.4%, helped by comments from APEC leaders that they will maintain stimulus measures and data showing China’s industrial output is rising while Japan’s economy is expanding. U.S. retail sales surged 1.4% last month, compared to the 1% gain predicted in a Reuters survey, which underpinned investors’ appetite for higher-yielding, or riskier, assets. The Volatility Index, commonly known as Wall Street’s “fear gauge,” declined 1.9% to 22.86. Federal Reserve chairman Ben Bernanke said the Fed would “help ensure that the dollar is strong and a source of financial stability,” sparking a spike higher in the greenback that quickly reversed.

“Risk appetite is still improving, equity markets are pretty good, and the current trend of global data supports a gradual recovery,” said Mike Jones, strategist at Bank of New Zealand. “Once markets digested Bernanke’s speech, they found there was not a lot of change and it will continue to run its policy of global stability, which will eventually lead to a stronger U.S. dollar.”

The kiwi jumped to 74.92 U.S. cents from 74.30 cents yesterday and advanced to 66.48 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 66.09. It climbed to 66.70 yen from 66.46 yen yesterday, and increased to 79.88 Australian cents from 79.68 cents. It gained to 50.095 euro cents from 49.643 cents yesterday, and was little changed at 44.51 pence from 44.50 pence. Jones said the currency may trade between 74.10 U.S. cents and 75.90 cents today, with Asian equity markets the main driver.

The Reserve Bank of Australia will release the minutes from its last meeting, and investors will be looking for clarification about how the central bank will proceed with its tightening of monetary policy. Traders are confused about whether the word “gradual” from the RBA’s release means it will hike rates by 25 basis points at every meeting, or whether it will pause on occasion, Jones said.

Australia’s central bank was the first G-20 nation to begin hiking interest rates after its economy dodged recession, and the country’s unemployment rate shrank in the past two months.

Businesswire.co.nz

Comments from our readers

No comments yet