The New Zealand dollar climbed to a 16-month high on a trade-weighted basis after investors piled into currency after Reserve Bank governor Graeme Wheeler yesterday all-but ruled out a rate cut as he zeroes in on potential inflation emerging in the country's housing market.
The trade-weighted index rose as high as 74.45, the highest level since August last year, and traded at 74.36 at 8am in Wellington from 74.03 yesterday. The kiwi rallied to 83.12 US cents from 82.87 cents yesterday.
RBNZ's Wheeler kept the official cash rate at 2.5 per cent and told reporters it will stay there until the end of 2013 as he keeps tabs on an Auckland property market that's heating up and building inflation pressures in the Canterbury rebuild. The bank hiked its projections for the TWI and sees it holding above 73 until December 2013, and falling to 71.40 in early 2015.
"The RBNZ gave the market the green light to keep buying the kiwi and that's what they've done," said Mike Jones, currency strategist at Bank of New Zealand in Wellington.
"The currency looks very strong and completely shook off a near 1 cent collapse in the euro."
