The New Zealand dollar stretched back towards three-year highs yesterday, aided by a weak US dollar and comments from Finance Minister Michael Cullen seen as endorsing a stronger currency.
The kiwi closed at US55.18c compared with its US54.77c close on Tuesday having traded a US54.63-55.27c range.
Dr Cullen said foreign investors may be buying the kiwi because the economy is expanding faster than its trading partners, rather than to get higher interest rates.
The New Zealand dollar is the second-best performer against the US dollar in the past 12 months, having gained 31 per cent.
The economy likely expanded 4 per cent in 2002, more than five times the pace of the US economy in the last quarter.
Dr Cullen said interest rate differentials were having less influence than they had been, while New Zealand's "economic fundamentals look more attractive".
The New Zealand dollar was at the top end of its equilibrium range against the US currency and out of line with the Australian dollar, Dr Cullen said.
The New Zealand dollar has gained 13 per cent against the Australian currency the past year, reaching a 7-1/2 year high last month.
Yesterday it was buying A93.25c compared with A93.02c on Tuesday. The aussie was trading at US59.17c compared with Tuesday's US58.89c.
Dr Cullen said the cross rate was out of line and he expected it "to return to more comfortable levels within a period of time".
The US dollar was sold against most major currencies following comments from Federal Reserve chairman Alan Greenspan.
The US dollar fell against the euro, which was at US$1.0747c.
It turned lower after Mr Greenspan offered a cautious view of the US economy and as attention turned once again to geopolitical concerns.
In his twice-yearly testimony before Congress, Mr Greenspan said geopolitical fears were creating "formidable barriers" to business spending. He also warned that government budget forecasts were "sobering", and called for restraint without delay.
Westpac chief dealer in New Zealand Basil Payn said the US dollar had been bought ahead of Mr Greenspan's testimony but with little to encourage investors, those dollars were given back.
He said the kiwi was swaying mainly on external factors.
Tuesday's strong jobs data did not have much influence on the forex market, but would reinforce the view that the Reserve Bank will leave interest unchanged at its next review on March 6.
New Zealand's trade-weighted index was near a four-year high with the kiwi showing particular strength against the euro, sterling and the yen. It was up at 61.01 compared with Tuesday's 60.64.
On the other crosses the kiwi was buying 0.5137 euro (0.5103), 66.72 yen (66.42), 34.08 pence (33.68) and 0.7532 Swiss francs (0.7484).
The Australian dollar was buying $1.0724 ($1.0763).
The monetary conditions index was up over 200 for the first time in nearly two years, closing at 217 compared with Tuesday's 185.
On the money market, the 90-day bank bills were at 5.86 per cent (5.85) while the bonds continued their powerful rally. The April 2004 government bonds were at 5.48 per cent (5.50), the November 2006s were at 5.44 per cent (5.53), the November 2011s were at 5.87 per cent (5.92), and the April 2013s were at 5.90 per cent (5.91).
- NZPA
<i>Currency:</i> Kiwi rises on Cullen comments, weak greenback
AdvertisementAdvertise with NZME.