The New Zealand and Australian currencies surged yesterday on news that Moody's had upgraded their credit ratings.
By 5pm the kiwi was US48.37c, well up on Friday's close of US48.25c, while the aussie rose to US55.34c (US55.13), surprising those who forecasted a weekly range capped at US48.30c.
Dealers said the market was caught short by the Moody's move - early in the day the kiwi had traded in a tight range, selling down to US47.96c before bouncing on news that Moody's had upgraded New Zealand's foreign currency rating by two notches to Aaa.
"We ran very hard, the market was very short, the aussie pushed higher, the kiwi went with it and we expected more sellers on top, (but) they weren't there until about the US48.35c/40c level," said one local dealer.
Australia also received solid Moody's ratings, but the agency noted the changes were part of an ongoing reassessment of ratings and not sparked by any one event.
"It was an interesting day," said the dealer, "and once the market's assimilated that the upgrade was really none too significant and in all reality, (is) bringing the foreign currency rating in line with the local domestic market rating, then the market will start to settle down a bit."
Forecasts for overnight suggested the kiwi might push up to US48.60c to "clean out" some short positions before consolidating downwards towards US48.25c.
Offshore, the US dollar gave up highs against the yen and the euro on wariness its recent rises were too high and too rapid.
Brokers said a Moody's ratings announcement for Japan was used as an excuse to adjust positions after the greenback's recent rally. Japan's foreign currency rating rose from to Aaa from Aa1.
Carrying over the recent bullish trend, the US dollar climbed to 125.65, its highest level since mid-June, in early Tokyo trade. But by 5pm NZ time, it had dropped back to 124.97. The euro was trading at US97.33c after slipping to US96.86c - the lowest mark since mid-September.
On the local crosses, the kiwi was at A87.37c (A87.50c at Friday's close), 0.4971 euro (0.4963), 60.47 yen (54.81) 0.3119 pence (0.3111), and at 0.7307 Swiss francs (0.7291).
The Australian dollar was at $NZ1.1446 from $NZ1.1427.
The 90-day bill yield was at 5.91 per cent (5.89), the New Zealand dollar trade-weighted index was at 55.81, down from its three-month high of 55.73 on Friday, and the monetary conditions index was at minus 224 (minus 231).
April 2004 bonds were at 5.73 per cent (5.76), the November 2006 yield fell to 6.11 per cent (6.16), and the November 2011 bond yield was at 6.40 per cent (6.46).
- NZPA
<i>Currency:</i> Dollar surges on news of moody's upgrade
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