The New Zealand dollar rose to month highs against the greenback and the Australian dollar after Reserve Bank Governor Graeme Wheeler said he sees "continued strong growth" in the economy, a sentiment backed up today with upgraded Treasury forecasts for growth for the next three years.
The kiwi dollar rose to 72.10 US cents as at 5pm in Wellington, from 71.19 cents late yesterday and climbed to 96.16 Australian cents from 95.71 cents. The trade-weighted index climbed to 78.86 from 78.17.
Wheeler told a business conference in Greymouth today that New Zealand was probably past the low point for CPI inflation, which would pick up with economic growth being driven by "construction spending, continued migration, tourist flows, and accommodative monetary policy." Wheeler's speech was followed by the release of the Half-Year Economic and Fiscal Update (HYEFU), which projected economic growth averaging 3 percent a year for the next five years, swelling the tax take and allowing the government to increase spending on infrastructure such as Auckland's City Rail Link. By contrast, Australia's economy contracted in the third quarter and today's data revealed a wider-than-expected trade deficit in October.
"Wheeler was a bit more positive than he was in November and then the HYEFU showed a really good fiscal position," said Imre Speizer, senior market strategist at Westpac Banking Corp. "They're both supportive for the New Zealand dollar."
Speizer said the strength of the kiwi on the cross rate against the Australian dollar was also driven by outright Aussie dollar selling in the face of the bad GDP and trade figures. Australia's economic slowdown was "part of a bigger story of the long transition from the mining boom to something else."
