NZ dollar gains in quiet trading as investors see decline as opportunity to buy
By Tina Morrison
May. 27 (BusinessDesk) - The New Zealand dollar advanced in quiet holiday trading as some investors saw the currency's recent decline as an opportunity to buy the local currency.
The kiwi rose to 85.48 US cents at 8am in Wellington from 85.34 cents at 5pm yesterday. The trade-weighted index gained to 79.81 from 79.73 yesterday.
Currency markets were illiquid overnight with the US markets closed for Memorial Day holiday and UK banks closed for the nation's May Day holiday. The New Zealand dollar edged up against its major counterparts as some investors bet its decline of about three quarters of a cent the past week made it an attractive level to buy. The kiwi remains attractive to overseas investors,because of its higher yield as the nation's central bank is expected to hike rates for a third time this year at its next review on June 12.
"It's probably a little bit of a correction in an illiquid market," said Peter Cavanaugh, client adviser at Bancorp Treasury Services. "With US and UK markets closed last night, you have got the world's two biggest FX markets closed and there's been no news."
Cavanaugh said currency markets may see more action tomorrow with Fonterra Cooperative Group expected to pull back the level of its payout to dairy farmers. Today, the New Zealand Institute of Economic Research is scheduled to publish its latest quarterly predictions.
Later this week, traders will be eyeing the release of first quarter growth figures in the US on Thursday night.
The New Zealand dollar edged up to 50.72 British pence from 50.68 pence yesterday, to 92.42 Australian cents from 92.37 cents, and to 87.07 yen from 86.96 yen as Bank of Japan Deputy Governor Kikuo Iwata said excessive gains in the currency are bad for the nation’s exports.
The kiwi was little changed at 62.60 euro cents from 62.65 cents yesterday after European Central Bank president Mario Draghi told a forum in Portugal the bank must be particularly watchful for any negative price spiral in the euro zone, and that it was not resigned to inflation being too low for too long.