NZ dollar climbs above 69 US cents, seen 'oversold' on local political concerns

Tuesday 28th November 2017

The New Zealand dollar rose above 69 US cents for the first time in about a week on perceptions it has fallen too far on local political concerns after touching a 17-month low this month.

The kiwi traded at 69.04 US cents as at 8am in Wellington and earlier reached 69.25 cents from 68.62 cents late yesterday. The trade-weighted index rose to 72.77 from 72.35.

The New Zealand dollar fell as low as 67.75 US cents on Nov. 17 on weaker commodity prices, waning risk appetite and concerns government plans to curb migration and cool the housing market would sap economic growth. The market is likely to get the Reserve Bank's assessment of the property market in the financial stability report due Wednesday while Finance Minister Grant Robertson is to give a key speech on Friday that may detail the government's policy timetable and funding plans.

"Our running thesis is that the NZD has been slightly oversold on unwarranted domestic political fears," said Jason Wong, currency strategist at Bank of New Zealand. "Net speculative short positions had reached their highest since May, so the hurdle rate for a modest recovery, is pretty low."

A short position is a bet that the currency will fall. Wong said BNZ's fair value estimate for the kiwi "has been drifting lower over recent weeks on the back of lower risk appetite, lower NZ commodity prices and a narrower NZ-US spread, but is still higher than spot" at 71.80 US cents. In the past decade, the kiwi has been more inclined to rise through December and BNZ's year-end target is 70 US cents.

The kiwi retreated from its overnight highs after figures showed US new homes sales jumped to 685,000 last month, beating estimates of 627,000.

Offshore, investors are looking ahead to congressional hearings on Federal Reserve Chair nominee Jerome Powell on Tuesday, followed by Fed Chair Janet Yellen's testimony to Congress on the US economic outlook on Wednesday. The Fed also releases its Beige Book on Wednesday

The kiwi rose to 58.02 euro cents from 57.54 cents and gained to 51.83 British pence from 51.53 pence. It rose to 4.5550 yuan from 4.5291 yuan, advanced to 90.75 Australian cents from 90.23 cents and gained to 76.66 yen from 76.44 yen.

(BusinessDesk)

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