Kiwi gains as greenback loses ground

The New Zealand dollar continued to gain against the US dollar yesterday as the greenback slipped ahead of US President- elect Donald Trump’s inauguration.

The local currency rose to US72.14c as at 5pm, from US71.38c late Thursday. The trade- weighted index advanced to 78.90 from 78.31.

“The kiwi made big changes overnight [ to yesterday morning] and that continued into Asia,” said Stuart Ive, senior dealer foreign exchange at OMF in Wellington. Ive said markets in general are a “mixed bag” as people position ahead of Trump taking office. “He and his policies will be the focus for markets next week,” he said. “We won’t see any real direction until we get some more clarity from the Trump Administration.”

The kiwi got a further lift yesterday after comments from Federal Reserve chair Janet Yellen who was “not so upbeat about US rate hikes. She was more measured,” said Ive. Among other things, Yellen said she doesn’t see the US economy at risk of overheating.

News that China’s industrial output eased in December while the economy accelerated slightly in the fourth quarter, however, had little impact on the kiwi. Ive said the main event risk, aside from any news out of the US, will be next week’s inflation data, due Thursday in New Zealand. Economists expect inflation was 0.2 per cent in the final three months of 2016 for an annual rise of 1.2 per cent, according to the median in a BusinessDesk poll. If the data pans out it will mark the first time inflation is back in the Reserve Bank’s 1 per cent- to- 3 per cent band in more than two years.

The kiwi rose to ¥ 82.62 from ¥ 81.78 on Thursday and to A95.08c from A94.92c.

The kiwi also gained against the British pound, trading at 58.30p from 58.13p late Thursday. Against the euro, it rose to € 67.46c from € 67.11c. It also pushed higher against the Chinese yuan, gaining to 4.9501 yuan from 4.8940 yuan. The two- year swap rate rose 3 basis points to 2.41 per cent, while 10- year swaps rose 5 basis points to 3.46 per cent.