NZ dollar has brief flurry above 79 US cts in short market
By Paul McBeth
Oct. 2 (BusinessDesk) - The New Zealand dollar had a brief spurt above 79 US cents as traders took advantage of a short, meaning over-sold, market to push the local currency around after its sustained drop over the past three months.
The local currency rose as high as 79.25 US cents, trading at 78.88 cents at 5pm from 78.01 cents at 8am and 77.77 cents yesterday. The trade-weighted index rose to 76.75 from 76.13 yesterday.
The kiwi dollar has slumped as much as 13 percent from a peak in July as New Zealand's economic growth starts to lose momentum in the face of falling commodity prices for logs and dairy products, two of the country's biggest exports, and as demand for the greenback rallies on heightening anticipation the Federal Reserve will start lifting interest as the world's biggest economy recovers.
"The kiwi has been slammed over the last few weeks and I think this is just traders taking advantage of a short market and knowing they can take it up to some pretty big levels," said Dan Bell, head of corporate sales at HiFX in Auckland. "It's a little bit of a short squeeze - the kiwi is being pushed around by the market."
Traders are waiting for US employment numbers on Friday in Washington for the latest gauge on the US economy, which has supported the greenback against all currencies.
The New Zealand dollar pared gains in Northern Hemisphere trading after dairy prices fell to a five-year low at Fonterra Cooperative Group's GlobalDairyTrade auction overnight Wednesday, with increased stockpiles and the Russian import ban on European Union dairy products adding to reduced Chinese demand. The ANZ Commodity Price index also showed a drop in prices for locally produced raw materials, its seventh monthly decline.
The kiwi gained to 62.27 euro cents from 61.63 cents yesterday ahead of the European Central Bank meeting, which will likely keep interest rates unchanged. President Mario Draghi's press conference will be watched for any hints the bank plans to add more stimulus to the regional economy.
The local currency slipped to 89.46 Australian cents at 5pm in Wellington from 89.60 cents yesterday, and increased to 85.68 yen from 85.46 yen. It rose to 48.56 British pence from 48.03 pence yesterday.