The New Zealand dollar extended its gains against the greenback after the People's Bank of China cut a 14-day repo rate, showing the central bank is willing to provide stimulus to the world's second-largest economy.
The kiwi rose to 78.98 US cents at 5pm in Wellington from 78.79 cents at the start of the day and from 78.72 cents yesterday, when data showed China's imports and exports were stronger than expected last month. The trade-weighted index fell to 76.68 from 76.57 yesterday.
China's central bank sold 20 billion yuan of 14-day repurchase agreements at 3.4 percent, compared to 3.5 percent at an auction last week, Bloomberg reported. While the repo rate is regarded as a minor interest rate, it did help lift sentiment on the day for the currencies of nations that rely on China as a major market, such as the kiwi.
"It's the China factor," said Imre Speizer, senior market strategist at Westpac Banking Corp. "We had trade numbers out of China on Monday and today we got the news they cut the repo rate. It shows they are providing a little bit of stimulus given growth is not rebounding like they would have forecast."
Speizer said the kiwi may reach as high as 79.75 US cents in the next 24 hours and would find support if it fell to around 78.40-78.60 cents. There is a risk the kiwi will have a bigger bounce in the next few weeks on the prospects of weaker-than-expected US data, he said.
