NZ dollar gains on positive GDP

Photo / Dean Purcell

The New Zealand dollar rose against the greenback, recovering almost all the ground it lost since the Febbury 22 earthquake, buoyed by a surge in investor appetite for higher yielding or riskier assets and positive fourth quarter economic growth numbers.

Fourth quarter GDP numbers yesterday beat expectations, with New Zealand's economy growing 0.2 per cent in the three months ended December 31, and lifted kiwi dollar on the back of relief buying.

That set the currency up for further support in the offshore session, where a rally on global equity markets continued to gather momentum, and stoked demand for growth-linked currencies such as the New Zealand and Australian dollar.

The Chicago Options Exchange Board's Volatility Index, known as the VIX and treated as Wall Street's 'fear gauge', fell to 18.09 from 18.82 yesterday, its lowest level since March 1.

"The data corroborated our view the NZ economy was showing low level momentum prior to the Christchurch earthquake, and that much of that momentum remains, along with the associated inflationary pressures," said Kymberly Martin, strategist at Bank of New Zealand.

"The NZ dollar was supported by several factors; a rise in risk appetite, strengthening global commodity prices, and a GDP figure for Q4 that dispelled concerns regarding NZ re-entering recession."

The kiwi rose to 74.99 US cents from 74.54 cents yesterday, and gained to 65.57 on the trade-weighted index of major trading partners' currencies from 65.43.

It fell to 73.38 Australian cents from 73.63 cents yesterday, and rose to 60.68 yen from 60.34 yen.

It fell to 52.85 euro cents from 52.94 cents yesterday, and rose to 46.53 pence from 45.92 pence previously.

Currency markets shrugged off lingering concerns that Portugal may need to tap a further bailout after law makers rejected Prime Minster Jose Socrates' austerity budget, with the European currency gaining against the greenback for the first time in three days.

Tim Kelleher, head of institutional FX sales NZ at ASB Institutional, said the kiwi may trade in a range of between 73.50 US cents and 75.60 cents.