Dollar gains amid rumours of Swiss central bank intervention

Friday 19th June 2009

The New Zealand dollar gained amid rumours of a currency intervention by the Swiss National Bank, while better-than-expected data out of the US stoked investors’ demand for high-yielding, riskier assets.

Some 15 billion Swiss Francs were sold in Europe, more than seven times the usual two billion, prompting speculation the Swiss National Bank, the country's central bank, moved to devalue its currency.

Chairman Jean-Pierre Roth said he would continue to stop an irrational rise in the franc, although he stopped short of confirming an intervention.

US economic activity declined at a slower-than-expected rate last month, according to Federal Reserve of Philadelphia, as the number of Americans claiming unemployment insurance declined to 6.69 million, stoking optimism the US recession may be past its nadir, and encouraging investors to seek high-yielding assets such as the kiwi and Australian dollars.

“The Swiss National Bank intervention saw the euro and Sterling go lower” and the kiwi probably benefited the most against the yen cross, said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia.

“There’s seemed to be some Toshin fund buying of offshore investments,” he said of large Japanese foreign currency investment funds.

The kiwi advanced to 63.80 US cents from 63.42 cents yesterday, and gained to 60.58 from 60.15 on the trade-weighted index, or TWI, a measure of the currency versus a basket of trading partners. It jumped to 61.54 yen from 60.72 yen yesterday, and climbed to 68.98 Swiss francs from 68.31 francs.

The currency increased to 79.94 Australian cents from 79.42 cents yesterday, and rose to 45.91 euro cents from 45.43 cents.

Kelleher said the currency may trade between 63.50 US cents and 64 cents today as it continues to hold within its medium-term range of 60 cents to 65 cents.

The World Bank’s quarterly outlook for China added to improved global sentiment, as it raised its forecast gross domestic product for the world’s largest emerging economy to 7.2% annual growth this year, from the 6.5% it projected in March.

The Australian dollar’s “stellar” performance surprised Kelleher, as he expected the Reserve Bank of Australia’s announcement that it sold A$1.5 billion worth of notes last month, the most in five years, would have weighed on support for the currency.

The currency advanced to 79.94 US cents from 79.42 cents yesterday.

Businesswire.co.nz

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