The New Zealand dollar surged after the central bank yesterday signalled interest rate hikes were on the horizon, increasing the lure of local assets.
The kiwi rose to a six-week high of 81 US cents, and recently traded at 80.95 cents, from 79.80 cents at the 5pm market close in Wellington yesterday. The local currency surged to a four-and-a-half year high of 87.74 Australian cents, and recently traded at 87.23 cents, from 87.14 cents yesterday.
New Zealand Reserve Bank governor Graeme Wheeler kept the benchmark rate at a record low 2.5 per cent at the six-weekly official cash rate review yesterday and said that monetary stimulus will likely be needed in the future, citing upward pressures to inflation from a construction and housing boom.
"The Reserve Bank has explicitly shifted its guidance to a tightening one, that is the first time we have seen this explicit tightening bias stated in words," said Imre Speizer, senior currency strategist at Westpac Banking. "It was quite hawkish. That was a surprise to pretty much everybody in the market."
US dollar weakness is also supporting a higher kiwi after a US report on core durable goods failed to meet expectations, suggesting GDP forecasts would be revised downwards, said Westpac's Speizer.
