NZ dollar gains as record February trade surplus affirms local growth story
By Paul McBeth
March 27 (BusinessDesk) - The New Zealand dollar rose after a record trade surplus for the month of February fuelled
optimism about local economic growth, which has tipped the Reserve Bank into a tightening cycle to head off the threat
of future inflation.
The kiwi rose to 86.25 US cents at 5pm in Wellington from 85.95 cents at 8am and 85.87 cents yesterday. The
trade-weighted index advanced to 80.43, matching a post-float record it reached last week, from 80.16.
New Zealand’s posted a trade surplus of $818 million in February, a record for that month, and beating economists’
expectations of $600 million. The country has been benefitting from rapid gains in exports of dairy, meat and logs to
China, which now accounts for about 21 percent of New Zealand’s international sales. The trade data added to upbeat view
of New Zealand’s economy, which is forecast to grow at an annual pace of 3 percent this year.
That momentum prompted the Reserve Bank to lift the official cash rate 25 basis points to 2.75 percent this month, and
signal a further 2 percentage points of increases over the coming two years as governor Graeme Wheeler looks to keep
inflation in check.
“The trade balance was a rip-snorter,” said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional.
“Nothing bad is coming out of New Zealand at the moment, and it’s a continuation of the theme” which has supported the
kiwi, he said.
Ongoing concerns about the tensions between the Group of 7 leading industrialised nations and Russia fuelled demand for
Japan’s yen, typically a favourite among investors looking to reduce the risk of their holdings, which strengthened to
102.03 per US dollar from 102.28 yesterday. The kiwi gained to 88 yen at 5pm in Wellington from 87.83 yen.
The local currency pared a decline against its Australian counterpart, trading at 93.35 Australian cents from 93.59
cents yesterday. It increased to 62.58 euro cents from 62.43 cents yesterday, and was little changed at 52.01 British
pence from 51.94 pence.
(BusinessDesk)