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NZ Dollar Gains Upward Momentum After Dip

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Oct 5 NZPA - The New Zealand dollar dropped slightly today on comments by Finance Minister Bill English but then hitched a ride higher with a rising Australian dollar.

The NZ dollar was at US72.01c at 5pm, from US71.61c at 8am and US71.20c at 5pm on Friday. During the weekend it fell below US71c for the first time in about 1-1/2 weeks, but the dip was brief.

The NZ dollar fell as low as US71.40c today after Mr English said NZ dollar was higher than would be expected at this point in the economic cycle.

"The English comments were enough to weigh a touch on the currency," said BNZ Capital senior strategist Danica Hampton said.

There was also speculation that the Reserve Bank of Australia will raise interest rates tomorrow. This sent the Australian dollar higher and the NZ dollar was dragged along with it.

Alan Mitchell and Ross Gittins, respectively economics editors of the Australian Financial Review and the Sydney Morning Herald, both wrote today that a move to 3.25 percent was now likely at Tuesday's meeting.

Neither cited any sources but their unanimity was enough capture attention.

Ms Hampton said there was about a 40 percent chance of a 25 basis point hike tomorrow in Australian rates.

The Australian dollar rose to US87.30c at 5pm from US86.64c at 8am. The NZ dollar rose to A82.45c from A81.84c on Friday.

There is also interest in the results of the Fonterra milkpowder internet auction, which will be held overnight.

Westpac said the fundamental factors suggested the NZ dollar could move higher to around US74c, but technical factors suggested a decent correction. The NZ dollar was at 64.66 yen by 5pm after falling near 63 yen, its lowest level against the Japanese currency since mid-September, during the weekend. It was 63.59 yen at 5pm on Friday.

The NZ dollar was also up to 0.4920 euro at 5pm from 0.4894 at 5pm on Friday. The trade weighted index was 65.59 at 5pm today from 64.95 at 5pm on Friday.

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