The New Zealand dollar soared to its highest in more than two and a half years after Reserve Bank deputy governor Grant Spencer signalled to an investment conference in Hong Kong that a higher kiwi won't prevent the bank from future interest rate hikes.
The kiwi touched 86.85 US cents overnight, and was trading at 86.72 cents at 8am in Wellington, from 86.25 cents at 5pm yesterday. The trade-weighted index touched a new post-float high of 80.97, and was at 80.88 at 8am from 80.43 yesterday.
The New Zealand dollar jumped overnight as investors were buoyed by yesterday's better-than-expected trade data showing the highest ever February trade surplus, as the country continues to benefit from exports of primary products. The kiwi accelerated further after Spencer told the Credit Suisse Asian Investment Conference that exporters had adjusted to the high exchange rate, signalling the central bank doesn't plan to hold back on interest rate increases even as the currency accelerates.
The "better than expected trade numbers kept the currency bid but the main catalyst for the move were the comments from RBNZ deputy governor Spencer," Kathy Lien, managing director of FX strategy at BK Asset Management in New York, said in a note.
"While the NZD/USD appreciated more than 7 per cent over the past two months, Spencer did not express any renewed concerns about the currency," Lien said. "Instead he said exporters have adjusted to the high exchange rate, which suggests that they don't plan to slow tightening or intervene in the currency as a result of New Zealand dollar strength."
