NZ dollar gains as Asian stocks rally on improving investor sentiment

Monday 22nd February 2016

The New Zealand dollar gained, joining a rally in risk-sensitive assets, as stocks across Asia rose on improving investor sentiment.

The kiwi rose to 66.48 US cents at 5pm in Wellington from 66.34 cents at 8am and 66.29 cents on Friday in New York. The trade-weighted advanced to 72.26 from 72.10 last week.

Investor nerves have continued to settle in recent days, with the Chicago Board Options Exchange's Volatility Index, known as Wall Street's 'fear gauge', continuing to fall. Stocks across Asia gained, with China's Shanghai Composite up 2 percent in afternoon trading, Japan's Nikkei 225 index gaining 1.1 percent, and Australia's S&P/ASX 200 index rising 0.9 percent. Other risk sensitive assets such as oil prices also rose.

"Risk appetite did pick up a little today - oil futures had a bit of a bounce on the day and the Chinese equity market had a 2 percent bounce, US equity market futures are slightly ahead," said Imre Speizer, senior market strategist at Westpac Banking Corp. "There's not much to ruffle the kiwi's feathers and it's still stuck in a range."

A BusinessDesk survey of 11 currency advisers predicts the kiwi will trade between 65 US cents and 68 cents this week. Five expect little change, four predict an increase and two say it may decline.

The local currency climbed to 46.53 British pence from 46.01 pence on Friday in New York after London Mayor Boris Johnson threw his weight behind the UK leaving the European Union when the public votes in a binding referendum on June 23. UK Prime Minister David Cameron extracted some concessions from the regional bloc to try and rally support for ongoing membership.

Tony Murphy, a dealer at OMF in Auckland, said the kiwi joined a broad rally against the British pound following the Johnson's announcement.

The local currency rose to 75 yen from 74.60 yen on Friday in New York, and gained to 4.3332 Chinese yuan from 4.3222 yuan last week. It increased to 92.81 Australian cents from 92.67 cents last week, and advanced to 59.81 euro cents from 59.52 cents.

New Zealand's two-year swap rate fell two basis points to 2.46 percent, and 10-year swaps were unchanged at 3.17 percent.

BusinessDesk.co.nz

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