The New Zealand dollar rose to a week high against the yen as investors favour higher risk assets on optimism a political impasse that could have forced the US into debt default may be edging towards a compromise.
The kiwi this morning touched 81.49 yen, and was trading at 81.33 yen at 8am in Wellington from 80.67 yen at the 5pm market close yesterday. The local currency rose to 82.88 US cents from 82.58 cents yesterday. The trade-weighted index rose to 76.98 from 76.79 yesterday.
Optimism is rising that the US Congress may reach a deal to avert a US debt default on October 17 after Republicans said they would propose legislation for a short-term debt limit increase. The offer is conditional on the Democrats agreeing to talks to resolve a budget impasse, which they have previously refused to do.
"There's some optimism that the deal is going to go through so it is a risk on move and a lot of people fund themselves by borrowing in yen and investing in the kiwi, so that's why the kiwi ends up," said Tim Kelleher, head of institutional FX sales in New Zealand at ASB Bank. "It's the yen crosses more than anything else that were higher."
Kelleher said the kiwi is likely to continue to trade between 82 US cents and 83.50 cents today.