Kiwi up nearly 2pc for quarter
The New Zealand dollar is heading for a 1.9 per cent gain against the greenback this quarter as the country’s relatively high interest rates and strong economic outlook continue to attract investors, though concerns about global banks are tempering appetite for risk- sensitive assets.
The kiwi rose to US72.64c at 5pm in Wellington from US71.30c at the start of the quarter. It was down from US72.90c on Thursday. The trade- weighted index is heading for a 1.7 per cent quarterly gain to 77.17.
New Zealand’s currency has been a beneficiary of major central banks running near- zero interest rate policies, making the relatively high local rates on offer attractive to international investors. A strong domestic economy and recovering global dairy prices have supported that demand, though investors are becoming wary that the Reserve Bank will lower the official cash rate later this year.
“The kiwi’s going to be supported on dips because of the yield and that it’s seen as a safe haven” compared to the political risks facing Europe and North America, said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. “It’s been pretty well supported on any dips at 72/ 72.50 US cents.”
Kelleher said fears about the banking sector are weighing on investors going into the quarter- end with the US Department of Justice seeking a US$ 14 billion claim against Germany’s Deutsche Bank over an investigation into residential mortgage- backed securities. Hedge funds have started withdrawing some of their business from the bank and the German government is coming under increased pressure to show it’s ready to stand behind the lender. Germany’s second biggest bank, Commerzbank, this week announced plans to lay off 9600 people and suspend dividends to see it through a period of dwindling profits.
Local data yesterday showed a slowing in new residential building consents while a business confidence survey showed firms were upbeat about both the economy and their own activity.
The kiwi increased to A95.15c from A94.75c on Thursday and fell to 4.8415 Chinese yuan from 4.8658 yuan. It declined to 73.63 yen from ¥ 73.95 and dropped 64.74 euro cents from € 65c. It was little changed at 55.99 British pence from 56.02p.