KEY POINTS:
The New Zealand dollar pushed to a new 23 month high against the greenback today after analysts said a new business survey increased the chance of at least one more interest rate hike this cycle. It touched US72.56c, a level not seen since May 2005. It backed a little away from that to close on US72.45c compared with US72.03c before the Easter weekend.
The kiwi also hit a decade-long high against the Japanese yen. The Quarterly Survey of Business Opinion (QSBO) released today by the NZ Institute of Economic Research (NZIER) showed increasing inflationary pressures in the economy. Although general confidence dipped, the survey showed companies are raising prices, battling a tight labour market and running near capacity -- all implying increased inflationary pressure.
Goldman Sachs JBWere expects another 25 basis point hike in interest rates on April 26 and said any more data like today's survey would increase the probability of another hike in June. But ANZ said while the QSBO was an "unfriendly read" for the central bank it contained insufficient justification for a rate hike in April.
The kiwi made on all major currencies except the aussie dollar which hit a 17-year high. It eased to A88.07c from A88.15c on Thursday at 5pm. The Australian dollar put in a muscular performance during the session. Traders said robust economic data fanned speculation that Australia's central bank will increase interest rates next month. It closed locally on US82.28c from US81.70c on Thursday.
Against yen, the kiwi peaked at 86.38 yen, closing not far below that 10-year high on 86.27 compared with its 85.47 close on Thursday. BNZ currency strategist Danica Hampton warned traders not to get too carried away with the kiwi's strength. She said the US dollar looked primed to stage of bit of a recovery as the speculative market was already extremely short of US dollars. She suspected the market would become increasingly nervous about carry trades (where traders borrow in low interest regimes and invest in high rate areas) heading into Friday's G7 meeting of finance officials.
"Increasing nervousness towards carry trades will likely encourage short-term speculative players to trim back long NZ dollar-Japanese yen positions, and NZD/JPY supply should also help cap the gains in the NZD/USD. "
In major currency trading, the US dollar came under pressure, dipping from a six-week high against the yen as investors took profits ahead of the G7 meeting. Traders said this week's big theme will be any yen-friendly comments leading up the G7 meeting.G7 officials in the past have said yen weakness runs counter to Japan's economic recovery and warned investors they could be burned making such one-way currency bets.
"The market is on the lookout for whether we will see a repeat of the run-up to the last G7," said Fumihiko Kawano of Nomura Securities. "If officials start talking about yen weakness and specific reasons for it, we could see a sharp rebound in the yen, and the market is wary of that," Mr Kawano said.
Reuters currency rates:
5pm today 5pm Thursday
NZ dlr/US dlr US72.45c US72.03c
NZ dlr/Aust dlr A88.07c A88.15c
NZ dlr/euro 0.5398 0.5389
NZ dlr/yen 86.27 85.47
NZ dlr/stg 36.80p 36.46p
NZ TWI 70.56 70.24
Australian dollar US82.28c US81.70c
Euro/US dollar 1.3416 1.3365
US dollar/yen 119.07 118.65
- NZPA, Reuters
