NZ dollar holds on to ‘monstrous’ gains

NZ dollar holds on to ‘monstrous’ gains

By Paul McBeth

Oct. 13 (BusinessDesk) – The New Zealand dollar held on to most of its “monstrous” gain overnight as strong Australian employment data underpinned the turnaround in investor sentiment.

The kiwi dollar fell to 79.30 US cents at 5pm from 79.78 US dollars at 8am, up from 77.88 cents yesterday.

Investors flocked to the trans-Tasman currencies late yesterday when Asian equity markets turned around, with the kiwi climbing to a three-week high and the Australian dollar back above parity with the greenback. That came as China’s yuan fell to the lower limit of its trading band against the greenback, prompting speculation the world’s second biggest economy was dumping its US dollar holdings. The kiwi dollar rose 1.8 percent to 5.0602 Chinese yuan today.

“That was just a monstrous move,” said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. “The kiwi should drift back down in the next 24/48 hours – I don’t think there’s much more” left in the rally, he said.

Australia’s unemployment rate fell to 5.2 percent, its first decline since March, as the so-called ‘lucky country’s’ employers added 20,400 jobs last month, twice the median pick of a Bloomberg survey of economists. The strong data stoked demand for the Australian dollar, which has gained to US$1.0187 from 99.04 US cents yesterday.

The improving optimism saw the Chicago Options Board Exchange’s Volatility Index, known as Wall Street’s ‘fear gauge’ fall 7.1 percent to 30.67, its lowest level since Aug. 4, about the time the United States’ credit rating was downgraded.

The market largely ignored local data, which showed the expansion in New Zealand manufacturing continued to slow, profit warnings from NZX-listed companies including Fletcher Building has raised the prospect the nation’s recovery is stalling again with the reconstruction of Christchurch likely to take even longer than expected.

Kelleher said traders are primarily focused on the happenings in Europe and how it manages its sovereign debt woes and recapitalise the region’s banking system. Slovakia’s political parties agreed to pass legislation supporting the European Financial Stability Fund after the Parliament voted down the proposal on Wednesday.

The kiwi fell to 77.85 Australian cents from 78.63 cents yesterday and rose to 61.11 yen to 59.73 yen. It gained to 57.53 euro cents from 57.23 cents yesterday and rose to 50.37 British pence from 50.04 pence yesterday.

The trade-weighted index rose to 69.64 from 69.01 yesterday

(BusinessDesk)

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