NZ dollar rallies on unchanged OCR; Fed extends period for low interest rates

By Hannah Lynch

Jan. 26 (BusinessDesk) – The New Zealand dollar climbed in local trading against the greenback after Reserve Bank Governor Alan Bollard steered clear of talking down the currency and held the official cash rate at its historically low 2.5 percent.

The New Zealand dollar gained as much as 0.7 percent to 81.94 US cents, the highest level since Oct. 31, from 81.38 cents immediately before the announcement at 9 a.m. It traded at 81.66 at 5pm.

Bollard kept the OCR on hold, saying global financial markets are still threatening to push up local bank funding costs, and New Zealand’s economic recovery may be constrained by delays to the Christchurch rebuild, with recent gains in the currency holding down returns on elevated commodity export prices.

“It is hard to measure the Reserve Bank’s effect on the kiwi,” said Imre Speizer, market strategist at Westpac Banking Corp. “They’re slightly more upbeat view of life surprised people and that is what saw the kiwi bounce.”

Speizer said around half a cent of the kiwi’s movement could be attributed to the Reserve Bank announcement, with the rest of its gains the result of Federal Reserve announcement beforehand.

US Federal Reserve policymakers extended their previous pledge to keep interest rates low until the middle of 2013 to at least late 2014, as more than two years of economic growth have failed to push unemployment below 8.5 percent. The announcement caused the kiwi to rally as high as 81.44 US cents.

In the US, gross domestic product and consumer confidence are set for release tomorrow.

Markets were closed in Australia today for Australia Day and across Asia for Chinese New Year.

In New Zealand, overseas merchandise trade for December is set for release tomorrow morning.

The New Zealand dollar rose to 77 Australian cents from 76.83 cents yesterday and was up to 62.31 euro cents from 62.24 cents. It gained to 52.16 British Pence from 52 pence yesterday and advanced to 63.5 yen from 63.25 yen.

The trade-weighted index increased to 72.11 from 71.92 yesterday.

(BusinessDesk)

BUDGET 2012:
Parliament Debate Live - Video Of Budget 2011
Keith Ng Interactive Graphic: How the Budget Breaks Down
BUDGET 2012 - FULL COVERAGE: Reports / Analysis - Press Kit - Reaction (from everybody) - Previews (from everybody) - Pre-Budget Announcements

Gordon Campbell: On the Budget’s Spreadsheet Victories

It wasn’t as if expectations were sky high, exactly. Chances are, it was always more likely that we’d be seeing Bigfoot rampage through the Beehive lock-up than catch a glimpse of a credible growth agenda from this government. More >>

Sludge Budget Report - Short The Dollar! MEMO: To international bankers FROM: C.D. Sludge Please short the dollar! It'll be good for both you and us. And you know you want to. Greexit, Eurogeddon... watch out... flight to quality and all that. Follow your instincts. The NZ Debt Management Office has been so surprised at the unprecedentedly low interest rates that it can borrow at that it has already entirely pre-funded the 2013 fiscal deficit - all $8 billion of it! More >>

Pattrick Smellie Comment: Doddling along the best we can hope forCriticising Budgets for lacking vision or imagination is like shooting fish in a barrel, but even so, this year's Budget again feels like a missed opportunity. Perhaps it's the intrusion of real world needs that means the government couldn't make better political use of the $558.8 million it expects to gather in its first partial asset sale. More >>