NZ dollar climbs over 74 US cts as G-20 statement prompts a return to risk

Tuesday 10th November 2009

The New Zealand dollar climbed over 74 U.S. cents as markets returned to higher-yielding, or riskier, assets after the Group of 20 nations reiterated they will keep their stimulus measures in place until the global recovery is in place.

Stocks on Wall Street climbed as investors piled back into equities and commodity markets after the G-20 member states confirmed they will keep their extraordinary measures in place. The Chicago Board Options Exchange’s Volatility Index, commonly known as Wall Street’s ‘fear gauge,’ sank 1.3% to 23.54. Yesterday, Fonterra Cooperative Group lifted its forecast pay-out to farmers by 95 cents to $6.05 per kilogram of milksolids, underpinning support for the kiwi dollar amid projections it will inject about $1.2 billion into New Zealand’s economy.

“The G-20 stimulus will remain in place, effectively acting as an underwriter, until the global recovery is assured,” said Khoon Goh, senior markets economist at ANZ National Bank. “The Fonterra announcement has kept the rates market predicting an earlier rate hike from the Reserve Bank and will keep bids on the kiwi in the near-term for further moves higher.”

The kiwi surged to 74.17 U.S. cents from 73.12 cents yesterday and advanced to 66.05 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.64. It climbed to 66.78 yen from 66.35 yen yesterday, and increased to 79.73 Australian cents from 79.48 cents. It gained to 44.27 pence from 43.89 pence yesterday and rose to 49.45 euro cents from 49.20 cents.

Goh said the currency may trade between 73.55 U.S. cents and 74.45 cents today, with equity markets the barometer of currencies again, and the kiwi dollar is probably back on an upward trajectory after a brief correction over the past few weeks.

“Risk is back on the table – this is a genuine risk rally, unlike last week, which was hesitant,” Goh said.

National Australia Bank’s monthly survey of business confidence will be the major piece of data out today, while last month’s electronic card sales for New Zealand will give an indication of consumer spending ahead of data for third-quarter retail sales.

Businesswire.co.nz

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