The New Zealand dollar rose above 86 US cents overnight, as investors seeking higher yields anticipate a rise in the nation's benchmark interest rate tomorrow.
The kiwi touched a week high of 86.20 US cents early this morning and was trading at 85.97 cents at 8am in Wellington from 85.78 cents at 5pm yesterday. The trade-weighted index advanced to 79.90 from 79.76 yesterday.
Traders have priced in a 97 percent chance for a rate hike by New Zealand's Reserve Bank tomorrow, according to the overnight index swap curve. The nation's central bank last month became the first to raise rates this cycle and is expected to increase the benchmark rate by another 25 basis points to 3 percent tomorrow to head off the threat of future inflation.
"A rate hike, as universally expected by the market, could still initiate a rally, as New Zealand further solidifies its upward interest rate track, against a global backdrop of struggling economies and near zero interest rates," Peter Cavanaugh, client advisor at Bancorp Treasury Services, said in a note.
In New Zealand today, March data is released on migration at 10:45am and credit card spending at 3pm.
