NZ dollar gains as prospect of more central bank stimulus dents greenback demand
By Paul McBeth
May 14 (BusinessDesk) - The New Zealand dollar gained amid speculation central banks in the US and Europe will retain stimulatory conditions, helping underpin growth and driving stocks higher.
The kiwi rose to 86.58 US cents at 5pm in Wellington from 86.30 cents at 8am, when it was unchanged from 5pm yesterday. The trade-weighted index advanced to 80.46 from 80.21 yesterday.
US stock markets reached new records as government figures showed US retail sales grew 0.1 percent in April, below expectations, raising the prospect the Federal Reserve will have to keep near-zero interest rates for longer than expected. A recovering US economy and rising interest rates are expected to see the greenback appreciate, with weak data damping demand for the world’s reserve currency. The US dollar also came under pressure from reports that Germany’s Bundesbank was willing to back an array of measures by the European Central Bank, paving the way for the way for increased stimulus in the region.
“Stock markets continued to climb and there was a continuation of risk-on sentiment being helped by the US data at the moment,” said Alex Hill, head of dealing at HiFX in Auckland. “The US dollar was sold across the board – you can bet against it in the short- and medium-term, but not the long-term.”
HiFX’s Hill said the kiwi has support at 85.80 US cents, and faces resistance at 87 cents.
Local news didn’t deter the gains, after the Reserve Bank affirmed its view that New Zealand’s financial system is in relatively good health, with restrictions on low-equity mortgage lending damping the property market, while government figures showed a slowdown in the pace of consumer spending growth.
Traders will be watching the US producer price index on Wednesday in Washington ahead of the consumer price index on Friday for a gauge on inflation in the world’s biggest economy.
The kiwi was little changed at 92.15 Australian cents from 92.22 cents yesterday after Australia’s Federal government announced austerity measures in the face of large fiscal deficits.
The local currency climbed to 63.11 euro cents from 62.72 cents yesterday, and gained to 51.36 British pence from 51.12 pence. It advanced to 88.43 yen from 88.24 yen yesterday.