The New Zealand dollar bounded to fresh six-year highs against the United States dollar today, and may receive another boost if surprisingly strong labour market data forces the Reserve Bank to hike interest rates soon.
To show its strength is not only against the greenback, the New Zealand Trade-Weighted Index also registered a six-year high of 64.42, compared with yesterday's 63.79. It finished on 64.33.
The kiwi was at six-year highs against sterling and the Swiss franc and a 3-1/2 year high against the euro.
Today's much stronger than predicted jobs numbers had greatly heightened the chances of a rate rise on December 4, when the Reserve Bank releases its quarterly Monetary Policy Statement, and that was likely to put further upward pressure on the kiwi, economists said.
The kiwi closed the session near its high at US62.32c, over half a cent higher than yesterday's close of US61.73c.
The Australian dollar ended at US71.47c (US71.09c) and the kiwi made inroads on that cross rate as it did with all others.
Bank of New Zealand market economist Stephen Toplis said that if it was not for the strength of the New Zealand dollar, "and the probability of its pushing higher still", the RB's decision to hike rates next month would be straightforward.
But the inflation-dampening effects of the strong currency meant the chances of a rate hike were only 50/50, he said. However, the tight labour market meant the bank was likely to push the cash rate above the perceived neutral rate of 5.75 per cent next year, and that was likely to underpin the kiwi.
Exporters were definitely starting to feel the pinch. Former president of the Exporters' Institute Bob Fenwick, said businesses that could not afford insurance cover against the kiwi's rise were in serious trouble.
"If they move their prices they become uncompetitive and they lose their markets anyway, and of course they cannot continue to supply when the price they're getting is below cost."
On the crosses, the kiwi rose at the market close to A87.20c (A87.25c), 67.73 yen (67.59), 37.34 pence (36.88), and 0.8549 Swiss francs (0.8418).
The Australian dollar was at $1.1468 ($1.1515).
The monetary conditions index was at plus 433 (388), and 90-day bank bills were at 5.38 per cent (5.33).
On the debt market, yields on April 2004 bonds rose to 5.30 per cent (5.28), February 2006s to 5.93 per cent (5.89), and November 2011s to 6.23 per cent (6.22).
- NZPA
<i>Currency:</i> Kiwi bounds to new 6 year highs
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