NZ dollar climbs to six-week high, following commodity prices higher
By Paul McBeth
Oct. 7 (BusinessDesk) - The New Zealand dollar rose to a six-week high, extending gains after another increase in milk product prices at the latest GlobalDairyTrade auction, and higher commodity prices across the board.
The kiwi climbed as high as 65.61 US cents, the highest since Aug. 25, trading at 65.88 cents at 5pm in Wellington from 65.41 cents at 8am and 64.99 cents yesterday. The trade-weighted index advanced to 71.17 from 70.51 yesterday.
The Dollar Index, a measure of the greenback against a basket of currencies, fell to a two-and-a-half week low as the prospect of lower US interest rates for longer stoked demand for risk-sensitive assets.
Commodity prices rose, with Brent crude oil gaining 0.8 percent to US$52.35 a barrel, and the average winning price across all dairy products gained 9.9 percent to US$2,834 at the latest GDT event. Milk product prices had tumbled with other commodity prices in recent months, and their recovery over the past two months has eased concerns it would slow local economic growth.
Kiwi and Aussie and commodity currencies in general have quite well supported by the uplift in the crude oil price," said James Davies, senior foreign exchange dealer at OMF in Auckland. "Adding into the mix is the speculative positioning in which is seeing a net long position in the kiwi for the first time in a long time," he said, referring to the practice of investors betting an asset will appreciate.
OMF's Davies said the kiwi was also being supported by institutional funds who saw asset prices in emerging markets and across Asia Pacific as being cheap after the recent declines in their respective currencies.
New Zealand's two-year swap rate increased one basis point to 2.69 percent, and the 10-year swap was unchanged at 3.5 percent.
The kiwi rose to 91.68 Australian cents from 91.28 cents yesterday when it slipped against its trans-Tasman counterpart after the Reserve Bank of Australia was more upbeat than investors were expecting when keeping the target cash rate at 2 percent.
The local currency rose to 4.1854 Chinese yuan at 5pm in Wellington from 4.1301 yuan yesterday in the final day of China's Golden Week holiday, and gained to 78.96 yen from 77.61 yen. It advanced to 58.38 euro cents from 58.11 cents yesterday, and increased to 43.16 British pence from 42.86 pence.