NZ dollar gains after downbeat Bernanke comments
NZ dollar gains after failing to break through 70.80 cts on downbeat Bernanke comments
By Paul McBeth
Dec. 8 (BusinessWire) – The New Zealand dollar gained, after failing to break through a key support level of 70.80 U.S. cents, as Federal Reserve chairman Ben Bernanke said the world’s largest economy still faces “formidable headwinds” and interest rates will have to stay low for longer.
Bernanke hosed down suggestions the central bank will be forced to hike rates earlier than expected, though he acknowledged “some improvement” in the U.S. economy. The markets began pricing in early interest rate rises after America shed fewer jobs than expected last month and the jobless rate dropped to 10%. The Dollar Index, a measure of the greenback against a basket of six currencies, dropped 0.5% to 75.75.
“The market harked back to when the Fed said it hike rates when employment improves – all it needed was for it to print better numbers and revise upwards,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia. “Investors have figured out there were too many short positions out there,” he said, referring to traders who sell their positions in the expectation of being able to buy the asset at a discount.
The kiwi dollar gained to 71.27 U.S. cents from 70.82 cents yesterday and increased to 63.91 on the trade-weighted index, or TWI, a measure of the currency against a basket of five partners, from 63.76. It was unchanged at 78.12 Australian cents and edged up to 63.74 yen from 63.69 yen yesterday. It rose to 48.09 euro cents from 47.94 cents yesterday and was little changed at 43.35 pence from 43.33 pence.
Kelleher said the currency may trade between 70.90 U.S. cents and 71.50 cents today with a bias to the downside, and he will be watching to see if it breaks through 70.50 cents, which could see it slide lower.
“The kiwi is still going well” and needs the euro and Australian dollar to break through US$1.4750 and 90.50 cents respectively before it will head lower, he said. The euro rose to US$1.4811 cents from US$1.4764 cents yesterday, and the Australian dollar gained to 91.21 cents from 90.59 cents.