The New Zealand dollar soared above 85 US cents for the first time in five months as investors bet delays caused by the US government shutdown means the Federal Reserve will keep monetary stimulus in place for longer.
The kiwi touched 85.24 US cents early this morning, and was trading at 85.02 cents at 8am in Wellington, from 84.24 cents at the 5pm market close yesterday. The trade-weighted index advanced to 78.31 from 78.15 yesterday.
The US dollar index, which measures the greenback against a basket of currencies, fell as the end of a political stalemate in the US turned investor attention to the impact of delayed data caused by a two week government shutdown. Investors expect the disruption will prompt the Fed to push out its plans to taper its US$85 billion a month bond buying programme, which has weakened the US dollar.
"The market has gravitated towards a 'Fed on hold indefinitely' view, which is a plausible initial reaction," David Croy, head of markets research for ANZ New Zealand, said in a note. "With Fed tapering off the visible horizon, the US dollar is under pressure and the focus is back on carry, which is hugely New Zealand dollar supportive."
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