Heavy demand pushes kiwi past US73c

Overseas investors could be preparing for a major acquisition in NZ - perhaps Shell. Photo / Hawkes Bay Today

The New Zealand dollar surprised market watchers yesterday by barging through the US73c mark on strong demand from overseas buyers, stoking speculation a large acquisition of New Zealand assets is imminent.

More action in foreign exchange markets was provided by the Reserve Bank of Australia's decision to raise the official interest rate.

Late on Monday, the kiwi was rising with the Australian dollar on increasing expectations of an RBA hike.

However, early yesterday the kiwi outstripped the aussie, and by 8am was buying US73.14c - its highest level against the greenback in 14 months. It closed yesterday at US73.35c, having traded as high as US73.46c.

Against the aussie it rose to A83.19c early yesterday from Monday's close of A82.45c. It was stronger against most other major currencies, including the euro and the British pound, where it neared a post-float high of 46p.

Rankin Treasury Services' Derek Rankin said the kiwi's outperformance of most other currencies overnight suggested "someone in New York bought a lot of NZ dollars".

"Either it's a carry trade where someone's just borrowed US dollars cheaply and invested in NZ dollars or someone's bought something."

A media report yesterday tipped global private equity firm TPG as a potential buyer of about $1 billion worth of oil company Shell's New Zealand assets, including 230 petrol stations.

BNZ Capital markets strategist Mike Jones was unaware of rumours of a big transaction requiring large amounts of New Zealand dollars, "but certainly the demand we've seen over the last 24 hours has had a large offshore component".

"Particularly early this morning, we saw some big real money and macro accounts buy New Zealand dollars in reasonably large amounts and that's what saw that sharp pop up in the kiwi quite early this morning."

Currency watchers had been expecting a quiet week for the kiwi, however, it had been "a case of all the stars lining up for the New Zealand dollar over the last 24 hours", said Jones.

Supporting factors included strong commodity price data on Monday, particularly for dairy products; another bout of broad-based US dollar weakness and expectations of an RBA hike.

The RBA decision at 4.30pm New Zealand time quickly reversed much of the kiwi's gains against the aussie over the previous few hours.

At A83.80c before the announcement, it fell the best part of a cent within a few minutes and closed at A82.99c.

But the kiwi's strength against other currencies in the lead-up to the RBA's decision had probably restricted further progress on the other crosses, said Jones, who would have otherwise expected to see it coat-tail on the aussie.