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NZ Dollar Rises Even As Australia Raises Interest Rates

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, Oct 6 NZPA - The New Zealand dollar rose strongly today even though the Reserve Bank of Australia raised its official cash rate to 3.25 percent from 3 percent at 4.30pm local time.

Derek Rankin at Rankin Treasury said the dollar's strength appeared to be a separate story to the Australian rate rise.

The NZ dollar was at US72.10c around midnight last night and rose to US73.20c by 8am when other currencies had barely moved.

"Someone in New York, or London started to buy the NZ dollar and by the looks of things were buying it through today," he said.

"It is either a carry trade being run out of New York or it is some kind of an equity play. Someone is buying something."

The speculation of a buyer of NZ dollars came at a time when Shell was selling assets in New Zealand, but dealers could not make a direct link between that an the demand for the currency.

The NZ dollar traded as high as US73.46c today before the Australian rate decision. It was US73.35c at 5pm from US72.01c at the same time yesterday.

Focus is also turning to Fonterra's internet auction of whole milkpowder, which occurs overnight.

Mr Rankin expected the NZ dollar to continue to be firm on the back of firm commodity prices and a recovering economy.

The ANZ commodity price index, published yesterday, recorded its largest monthly rise for 22 years in September.

The Australian dollar rose to US88.29c by 5pm from US87.92c at 8am.

Mr Rankin said he expected the RBA to raise rates because economic data in Australia had been firm, though trade numbers today disappointed.

The market had initially not been expecting a rate rise so early in the economic cycle but media commentators in Australia had speculated about it on Monday.

The NZ dollar has been firm on a range of crosses, including against the Australian dollar.

It was A82.99c at 5pm from A82.45c at the same time yesterday and was at 16-month highs against the euro, ending at 0.4985 euro today from 0.4920 yesterday.

By 5pm the NZ dollar was up to 65.29 yen from 64.66 at yesterday.

The trade weighted index rose to 66.45 from 65.59 at 5pm.

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