NZ dollar hits new 3-year high against US

Photo / Dean Purcell

The New Zealand dollar rose to a three-year high against the greenback, breaking a technical resistance level as the US currency continued its decline ahead of tomorrow's Federal Open Markets Committee meeting.

The kiwi dollar touched a fresh high of 80.70 US cents before paring back slightly as traders continued to turn bearish on the US dollar amid speculation the world's biggest economy will linger in a low interest rate environment for a prolonged period.

At tomorrow's FOMC meeting and first ever post-session press conference, Fed chairman Ben Bernanke is expected to keep rates on hold and announce the run out of the second round of quantitative easing at the end of June. The Fed's trade-weighted Dollar Index fell to a record low 69.0337 on April 21, Bloomberg reported, citing central bank figures.

"The (US) dollar itself, on the trade weighted basis, is at the lowest it has ever been," said Tim Kelleher, head of institutional FX sales New Zealand at ASB Institutional. "At this stage it is hard to see the (US) dollar decline ending any time soon."

The kiwi recently traded at 80.65 US cents from 80.13 cents yesterday, and rose to 69.10 on the trade-weighted index of major trading partners' currencies from 68.81. It gained to 74.80 Australian cents from 74.71 cents yesterday, and climbed to 65.77 yen from 65.48 yen. It rose to 55.06 euro cents from 54.88 cents yesterday, and gained to 48.94 pence from 48.53 pence previously.

The New Zealand currency also drew support from stronger global equities which recovered after sliding after the Easter weekend. On Wall Street, the Standard & Poor's 500 Index rose 0.9 per cent to 1346.74, while Europe's Stoxx 600 rose 0.3 per cent 281.23.

Traders will also be closely watching the release of Australian Consumer Price Index data for the March quarter today. Australian headline inflation figures are expected to reflect the effects of the Queensland floods, rising to 1.3 per cent in the quarter and 3.1 per cent for the year with food and petrol prices elevated.

"We expect a reasonably high number which should add to the upward bias of the Australian dollar," Kelleher said.

He expects the Kiwi dollar to trade in a range of between 80.40 US cents and 80.90 cents today.