WELLINGTON/SYDNEY: The New Zealand dollar vaulted to a lifetime high against a basket of currencies on Thursday, and along with the neighbouring Australian dollar notched hefty gains versus the US dollar after dovish comments by the US Federal Reserve.
The New Zealand dollar pushed up to 81.30 on a trade-weighted basis, and touched a six-week peak against the US dollar. It hovered near its highest since early May against the Aussie and yen, while it posted a 13-month peak versus the euro.
Later, it dipped to $0.8709, from a peak of $0.8736, following a weaker-than-expected headline reading of New Zealand first-quarter GDP.
New Zealand's economy expanded 1.0 percent in January-March, just under forecasts for a 1.2 percent rise. Annual growth of 3.8 percent exceeded expectations to hit a six-year high as growth in the previous quarter was revised higher.
"Markets were initially disappointed by the quarterly figure," BNZ currency strategist Raiko Shareef said.
"The market may have been expecting a number closer to 1.3 percent or 1.4 percent as opposed to formal forecasts.
Some of the positioning was reflective of that, and the sell-off was some of those positions being unwound."
Shareef at BNZ said that the air was getting thin for the kiwi around these levels, adding that it was unlikely that its latest rally would vault it above a 2-1/2-year high of $0.8779 hit last month.
Bids were lined up below $0.8700, while the kiwi was also supported after it broke above previous trendline resistance around $0.8690.
The Australian dollar rose to $0.9400, having gained 0.7 percent on Wednesday, pulling closer to a recent peak of $0.9438. The Antipodean currencies fared particularly well after Fed Chair Janet Yellen signalled that US interest rates will stay low for a while yet.
The Fed comments encouraged carry trades where investors borrow at a low rate to invest in higher-yielding assets like the Aussie and kiwi.
The Aussie has gained more than 5 percent so far this year and its return above 94 cents is unlikely to please the Reserve Bank of Australia (RBA), which has been calling for a lower currency.
"Obviously (RBA Governor) Glenn Stevens is not on Yellen's Christmas card list because this is the complete opposite of what the RBA wants," said Annette Beacher, head of research of Asia-Pacific at TD Securities.
"The RBA wants the Fed to start being hawkish and Yellen is not playing ball," she added.
Earlier in the week, an RBA official reiterated that falling prices for the country's major commodity exports argued for a decline in the currency.
Resistance was seen at $0.9438 and $0.9461 with support at $0.9365.
New Zealand government bonds rallied, tracking gains in US Treasuries and brushing aside the GDP figures to push long-dated yields 4 basis points lower.
Australian government bond futures leapt, with the three-year bond contract up 6 ticks at 97.230. The 10-year contract gained 8 ticks to 96.330.
The premium offered by Australian 10-year yields over Treasuries last stood at 107 basis points, very near a 10-month trough of 105 basis points touched Tuesday.
Comments
Comments are closed for this article.