NZ dollar rises above US67c after OCR lift

Photo / Dean Purcell

The New Zealand dollar rose rapidly back above US67c after the Reserve Bank this morning confirmed market expectations of a 0.25 percentage point lift in the official cash rate to 2.75 per cent.

The kiwi was trading around US66.68c just before the OCR announcement, from US66.58c at 8am and after peaking at US67.50c overnight amid global stock market rallies and a return to risk appetite.

Within 5 minutes of the Reserve Bank statement the kiwi had climbed to US67.06c and the currency's trade-weighted index rose to 65.84 from its 65.40 level at 8am.

Reserve Bank Governor Alan Bollard said the bank had decided as previously signalled to begin removing some of the monetary policy stimulus currently in place.

"The further removal of stimulus will be reviewed in light of economic and financial market developments," he said.

BNZ markets strategist Mike Jones said in a commentary before the OCR announcement that an improvement in the global backdrop and risk appetite saw sentiment towards the kiwi dollar improve over the first part of last night.

Leaked reports suggesting Chinese exports rose much more than expected helped allay fears about a slowing in Chinese growth, while Federal Reserve chairman Ben Bernanke made "soothing comments" about the strength of the US recovery.

But positive NZ dollar sentiment faded over the second part of the night, as US stocks surrendered their early gains and whispers of problems in Spanish funding markets knocked back risk sentiment, Jones said.

He said the OCR hike would need to be accompanied by some hawkish undertones from the Reserve Bank to see the kiwi retest last night's US67.50c high.

"Momentum in NZD/USD is still negative and global equity market sentiment remains the bigger driver of the currency for now," he said.

- NZPA