Kiwi soars ahead of Yellen guidance

The kiwi dollar this week hit new 15-month highs against the US dollar as the world waits on a key speech from US Federal Reserve chairwoman Janet Yellen.

The New Zealand dollar has traded as high as US73.35c this week, shrugging off six official interest rates cuts over that period.

US dollar weakness continues to be the major driver of the kiwi’s strength, NZ Forex’s Alex Hill told

Liam Dann When she [kiwi] goes lower, it will happen quickly. Alex Hill NZ Forex

The Economy Hub yesterday.

Over the past 12 months the market had been let down by the US Fed, which indicated it was ready to raise US rates but so far has not done so. With US rates at just 0.5 per cent, New Zealand’s record low rates of 2 per cent still looked good to investors.

“So what we’re is seeing yield hunters still wanting to get involved with the kiwi,” Hill said.

Yellen will deliver a key speech at the central bankers conference in Jackson Hole Wyoming this weekend. If the speech indicates a strong willingness to start raising US rates we should see the kiwi fall. But there are already concerns in the market that Yellen won’t be that strong.

“At the end of that speech, the first question she is going to be asked is, ‘When will you raise rates?” Hill said. “We’re looking for those magic words because they are running out of excuses.”

None of the big events such as China’s slowdown or Brexit had stopped growth, and the US job story was starting to look good. The kiwi could stay strong, but it has a track record of slow climbs and fast falls.

Hill said: “When she goes lower, it will happen quickly.”