NZ dollar holds above 74 cts after Bollard comment
NZ dollar holds above 74 US cts as Bollard returns to jawboning
By Paul McBeth
Nov. 11 (BusinessWire) – The New Zealand dollar held above 74 U.S. cents after central bank Governor Alan Bollard said the resilient currency has hindered an export-led recovery needed to rebalance the nation’s economy.
In the Reserve Bank’s Financial Stability Report, Bollard said the high currency was a threat to an improvement in the country’s current account deficit. He reiterated the New Zealand dollar needs to come down to help the economy restructure in a more sustainable way, and said it “needs to live more within its means to reduce its vulnerability to adverse developments in offshore markets.”
The kiwi dollar fell to 74.13 U.S. cents after the announcement from 74.28 cents immediately before the release. It traded at 73.99 cents in New York yesterday.
Equity markets in the U.S. and Europe clawed back gains after early losses following weak trade data in the U.K. and a fall in business confidence in Germany, while American insurer MBIA posted a loss. Fitch rating agency said the British economy was the most at risk of losing its AAA rating.
Danica Hampton, currency strategist at Bank of New Zealand, said the softness in global equity markets “helped take the sheen off the kiwi,” but she predicts it is still in an upward trend with the U.S. dollar looking “heavy.”
“There’s been an improvement in risk appetite and equity markets – it looks like the correction is over and the kiwi will march onwards and upwards,” she said.
The New Zealand dollar gained to 66.04 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.89 yesterday and increased to 66.53 yen from 66.41 yen. It was little changed 79.77 Australian cents from 79.75 cents yesterday and edged higher to 49.50 euro cents from 49.37 cents. It slipped to 44.35 pence from 44.42 pence yesterday.
Hampton said the currency may trade between 73.75 U.S. cents and 74.65 cents today, with the release of Chinese data likely to underpin a bias to the topside of the range.
“If we see any weakness, we’ll buy on dips, as the kiwi should go up on the Chinese data,” she said.
Chinese officials will release industrial production figures, retail sales and its trade balance this afternoon, while Westpac’s consumer confidence survey also comes out today.