Kiwi leaps back over US74c

The kiwi is heading for a 2.3 per cent weekly gain as investors continue to overlook signs of emerging inflation in the US and instead focus on improving risk appetite.

The kiwi rose to US74.14c at 5pm yesterday from US73.71c late on Thursday, and was up from US72.44 last Friday. The trade-weighted index gained to 75.55 from 75.33.

The US dollar index, which measures the greenback against a basket of currencies, is at a three-year low as traders shrug off emerging inflationary pressures, amid mounting worries over twin deficits in the world’s biggest economy. The International Monetary Fund estimates a 1 per cent increase in the budget deficit is worth about a 0.6 per cent increase in the current account deficit, suggesting a twin deficit in excess of 7 per cent by the end of the decade, and TD Securities this week said “those numbers do not bode well for the greenback in the medium-term”.

“It is almost as if the FX markets are ignoring the interest rates and arguably taking a lead from things like equities,” said Mark Johnson, a senior dealer at OMF. He said there may be more upside to come for the kiwi given Monday is a US holiday and could stoke volatility in thinly traded markets.

The kiwi rose to A93.13c from A92.90c on Thursday and traded at 52.49 British pence from 52.58p. It was at €.5911c.