NZ dollar powers above US77c

Photo / Martin Sykes

The New Zealand powered above US77c, as the greenback fell broadly after a surprise interest rate hike from Australia and positive euro zone economic news.

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.75 per cent as a preemptive strike against inflation.

That highlighted the contrast with the Federal Reserve in the United States, which is widely expected to ease policy further to help revitalise the US economy, and extended the differential between the two economies' two-year yields to their widest since early 2008.

The Australian dollar spent some hours above parity with the US currency overnight, before easing back under the US$1 level.

While the kiwi dived against the aussie after the Australian rate decision shortly before 5pm yesterday, dropping close to A76.40c, it reversed most of its losses through the night to be at A77.25c at 8am.

Against the greenback, the NZ dollar peaked around US77.40c from US76.47c at 5pm. By 8am the kiwi had eased to US77.17c.

Investors are waiting for the results of US midterm elections, due out later today, although most are focused on a two-day meeting by the Federal Open Market Committee, which looks set to announce a second round of monetary easing tomorrow morning, New Zealand time.

ANZ bank said NZ dollar strength was based around solid demand out of Asia, so moves in the NZ dollar today would be supported on any dips back around US76.80c as the market awaited tomorrow's Fed decision.

Topside resistance for the kiwi remained in the US77.40c to US77.60 zone, but that was merely technical and may be eliminated on further Asian demand, ANZ said.

The NZ dollar rose to 62.27 yen at 8am from 61.60 at 5pm, while being little changed at 0.5500 euros. The trade weighted index lifted to 67.98 at 8am from 67.52 at 5pm.

- NZPA