NZ dollar pushes towards 69 US cents as Wall St rallies on economic data

Friday 28th August 2009

The New Zealand dollar pushed back towards 69 U.S. cents stocks on Wall Street gained on better-than-expected economic data, stoking investors’ appetites for higher-yielding, or riskier, assets.

Stocks on Wall Street gained after American gross domestic product shrank was a smaller-than-expected 1% in the second quarter, while continuing claims for the unemployment benefit in the U.S. fell to 570,000 last week from 580,000 a week earlier. The Dollar Index, a measure of the greenback versus a basket of partners, dropped 0.6% amid speculation a large investment bank in the U.S. was unwinding its long positions in the greenback.

“Risk appetite soon returned following stronger-than-expected U.S. economic data,” said Mike Jones, strategist at Bank of New Zealand. “A rumour about a large U.S. investment bank unwinding its U.S. dollar long positions triggered the move.”

The kiwi climbed to 68.73 U.S. cents from 68.12 cents yesterday, and advanced to 63.75 on the trade-weighted index, or TWI, a measure of the currency versus the greenback, yen, euro, pound and Australian dollar, from 63.42. It increased to 64.30 yen from 63.81 yen yesterday and was little changed at 81.84 Australian cents from 81.83 cents. It rose to 47.88 euro cents from 47.68 cents yesterday.

Jones said the currency may trade between 68.40 U.S. cents and 69 cents and will probably follow movements in Asian equity markets today.

“There seems to be large resistance around 69 U.S. cents with big offshore players defending that level – it would take something big to push it through there,” he said.

New building consents in New Zealand probably rose 10% in July, according to BNZ economists, as the housing market continues to show signs of resurgence. Still, Jones doubts the data release will flow into currency markets.

The central bank will also announce credit aggregates for last month, which are expected to show an upward trend.

Japan will go to the polls over the weekend and is expected to vote in a new government. Any uncertainty caused by the election result could weigh on the yen, which gained to 93.48 per U.S. dollar from 93.72 yesterday.

Businesswire.co.nz

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