NZ dollar rises as buoyant economic news cements chance of rate hike next month

Friday 28th February 2014

The New Zealand dollar was the best performing major currency overnight, nudging above 83.90 US cents, as a raft of positive economic news cemented the likelihood of the Reserve Bank raising interest rates next month.

The kiwi touched a high of 83.91 US cents this morning, the fourth session this year it has risen above 83.90 cents, making it the best performer of major currencies tracked by Reuters. The New Zealand dollar was trading at 83.77 US cents at 8am in Wellington, from 83.24 cents at 5pm yesterday. The trade-weighted index advanced to 83.77 from 83.24 yesterday.

The local currency was buoyed by positive economic news yesterday, including a record forecast payout to dairy farmers by Fonterra Cooperative Group, estimated to add $500 million to the economy, positive trade data which has pushed the annual trade balance into surplus for the first time since March 2012 and the highest monthly gain in migrants since May 2003. The latest news adds to expectations that the Reserve Bank will become the first developed economy to hike interest rates next month.

"Yesterday New Zealand news continued to put the nation at the top of economic status," Peter Cavanaugh, client advisor at Bancorp Treasury Services, said in a note. "The New Zealand dollar is up across the board ... as the New Zealand economy and NZD maintains its 'Rock Star' status."

In New Zealand today, traders will be eyeing a report on building permits and the ANZ business confidence survey.

The New Zealand dollar advanced against the Australian dollar, rising to its highest level this month, after weaker-than-expected Australian capital expenditure data yesterday raised concerns about a recovery in the Australian economy. Traders are now betting there is a 5 percent chance the Reserve Bank of Australia will cut interest rates further, according to the Overnight Index Swap curve.

The kiwi touched a high of 93.70 Australian cents this morning and was trading at 93.43 cents at 8am from 93.08 cents yesterday.

The New Zealand dollar rose to 61.09 euro cents from 60.79 cents yesterday. Traders are awaiting a report on European February inflation later today as they weigh the likelihood of the European Central Bank adding more stimulus to the region's economy when it meets next week.

The local currency advanced to 50.19 British pence from 49.90 pence yesterday and gained to 85.59 yen 85.23 yen ahead of a the release of several key Japanese economic indicators today, including employment, inflation and industrial production.

Later today, reports are due on US GDP and consumer confidence while over the weekend, traders will be keeping an eye on the release of China's official manufacturing PMI.

BusinessDesk.co.nz

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