NZ dollar jumped to week high as economy beats expectations

NZ dollar jumped to week high as economy beats expectations

March 17 (BusinessDesk) - The New Zealand dollar jumped to a week high against the greenback as the local economy grew more than expected through the final three months of 2015, and after the US Federal Reserve scaled back its planned rate hikes and gave a gloomy view on the global economy.

The kiwi rose as high as 67.80 US cents, trading at 67.72 at 5pm in Wellington from 67 cents at 8am and 65.98 cents yesterday. The trade-weighted index climbed to 72.02 from 70.83 yesterday.

New Zealand's economy grew 0.9 percent in the December quarter, beating expectations, as business services and an expanding population fuelled activity. That stoked demand for the kiwi dollar, which had already gained against the greenback when the Fed kept the fed funds rate unchanged and trimmed projected hikes this year to two from four. Fed chair Janet Yellen was also pessimistic about weakness in Japan, Europe and emerging markets.

"The Fed didn't do any of the central banks a favour by keeping the US dollar weaker," said Tim Kelleher, head of institutional sales FX at ASB Institutional in Auckland. "The kiwi's going to wash around 65.50 US cents to 68.50 cents in the bigger scheme of things."

New Zealand's two-year swap rate fell three basis points to 2.24 percent at 5pm in Wellington, and 10-year swaps dropped seven basis points to 3.04 percent.

The kiwi gained to 89.02 Australian cents from 88.47 cents yesterday after Bureau of Statistics figures showed the unemployment rate unexpectedly fell across the Tasman in February, as the participation rate dropped due to fewer people seeking work. Still, a decline among part-time workers was more than offset by a pick-up in full-time positions.

ASB's Kelleher said the kiwi may fall against its Australian counterpart, with the Reserve Bank of Australia "clearly on hold" while New Zealand's central bank has a "reasonable chance" of cutting the benchmark rate at next month's meeting.

The kiwi jumped to 4.4002 Chinese yuan from 4.3015 yuan yesterday, and gained to 76.16 yen from 74.80 yen. It rose to 60.33 euro cents from 59.43 cents yesterday, and jumped to 47.48 British pence from 46.69 pence.

(BusinessDesk)

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