NZ dollar tests 87 US cents overnight after RBNZ hike
NZ dollar tests 87 US cents overnight following RBNZ interest rate hike
By Tina Morrison
June 17 (BusinessDesk) - The New Zealand dollar tested the 87 US cent level overnight for the second time since the Reserve Bank tightened monetary policy last week, as low volatility in currency markets kept the nation's relative high interest rates in demand.
The kiwi touched a high of 86.99 US cents overnight, a level it last tested on Friday morning after the Reserve Bank affirmed its rate hike track on Thursday. The local currency was little changed at 86.78 US cents at 8am in Wellington from 86.84 cents at 5pm yesterday. The trade-weighted index was little changed at 80.76 from 80.85 yesterday.
New Zealand's central bank raised interest rates for a third time last week and economists expect a further hike next month to curb inflation. A report Thursday is expected to show the economy was growing at a 3.1 annual pace in the first quarter. That contrasts with most other major economies where central banks are trying to keep interest rates as low as possible to stimulate growth.
"Kiwi has edged higher because currency volatility hit a fresh 7-year low yesterday so the interest rate appeal means that carry trade is still quite a good prospect," said Bank of New Zealand currency strategist Raiko Shareef.
He expects the local currency to trade between 86.30 US cents and 87 cents today with no major data releases scheduled.
Overnight, traders will be eyeing Fonterra Cooperative Group's fortnightly GlobalDairyTrade auction where prices have fallen for the past eight sessions. The Reserve Bank has citied lower commodity prices as a reason the kiwi should be falling.
The New Zealand dollar was little changed at 92.25 Australian cents from 92.31 cents yesterday ahead of today's release of the Reserve Bank of Australia's minutes from its last meeting.
Tonight, the UK and US release inflation data.
The kiwi slipped to 63.93 euro cents from 64.12 cents yesterday after a Bloomberg News report that the European Central Bank is likely to refrain from any new stimulus package in comings months as it reviews lenders' balance sheets.
The local currency was little changed at 51.09 British pence from 51.13 pence yesterday and unchanged at 88.34 yen.