NZ dollar jumps 1.1% as China veers away from rate hike
NZ dollar jumps 1.1% as China veers away from rate hike
by Paul McBeth
Dec. 14 (BusinessDesk) – The New Zealand dollar jumped almost one US cent as investors sought riskier, higher-yielding assets after the People’s Bank of China backed away from hiking interest rates to rein in its growing economy.
While a serious short term deterioration in New Zealand’s fiscal position is expected in the Half Year Fiscal and Economic Update from the Treasury this afternoon, traders said international events were dominating sentiment.
The Standard & Poor’s
500 index extended gains after hitting a 27-month high on
Friday in New York after the PBOC decided raising the amount
of reserve cash for lenders was an adequate response to
ballooning inflation.
Large acquisitions by General Electric Co. and Dell Inc. stoked investors’ risk appetite, as did speculation U.S. President Barack Obama will succeed in selling his tax package to the Senate. That comes ahead of the Federal Open Market Committee meeting on Tuesday in the U.S., which may see Chairman Ben Bernanke try and talk down interest rates after the yield on 10-year Treasuries surged 32 basis points last week.
“The PBOC is taking a more targeted approach to mopping up the excess liquidity in China through higher reserve requirements rather than the blunt interest rate tool,” said Mike Jones, strategist at Bank of New Zealand.
“We’re looking at a big squaring up of positions ahead of the Fed tomorrow - the moves in currencies were fairly excessive given the news last night” and the kiwi will range-trade until then, he said.
The kiwi jumped to 75.67 U.S. cents from 74.84 cents yesterday, and rose to 67.91 on the trade-weighted index of major trading partners’ currencies from 67.75.
It rose to 63.04 yen from 62.91 yen yesterday, and was little changed at 75.83 Australian cents from 75.86 cents. It fell to 56.42 euro cents from 56.70 cents yesterday, and increased to 47.65 pence from 47.40 pence. Jones said the currency may trade between 75.30 U.S. cents and 76.10 cents today, with retail sales and housing data likely to push the kiwi near the bottom of the range if they come in as poorly as expected.
The government will unveil its half-year economic fiscal update today, and will probably have to expand its debt programme with Prime Minister John Key yesterday foreshadowing a bigger than expected deficit, telling reporters “we have taken our fiscal position to the outer limit of what we regard as acceptable.”
(BusinessDesk) 09:10:28