6.40PM
A tough-talking Reserve Bank sent the New Zealand dollar soaring against all currencies today, but particularly against the Australian dollar, where it hit a nine-year high.
"We had it all today -- rate rises, weak unemployment (in Australia) and bombs in Jakarta," said Westpac chief dealer in New Zealand Basil Payn.
He said that while it was premature to talk of parity with the Australian dollar, it was not improbable.
The kiwi closed at A94.20c, its highest level since June 1995 when it touched an all-time high of A94.98c, since the kiwi was floated in 1985. The cross rate had closed yesterday at A93.51c.
"There are a lot of forces at work which suggest that cross is going to continue a little bit higher and whether it goes to parity or through parity is pretty hard to tell, really," he said.
He said there was demand out of Japan and other Asian centres to sell Australian dollars in favour of the higher-yielding kiwi. The bomb outside the Australian embassy in Jakarta today did not help aussie sentiment. Nor did weaker than expected Australian unemployment figures.
The kiwi's lift against the US dollar was not so pronounced, with the kiwi ending up at US65.30c against US64.89c at the opening before the bank made its announcement.
The bank's announcement that it was hiking the cash rate by 25 basis points was a surprise to no one, but the text suggested a strong probability of another rise in October and a good chance of a seventh rise for the year in December. That was what gave the kiwi its impetus.
"Obviously, with the Reserve Bank being hawkish and the weak data out of Australia there is a lot of interest in the kiwi against the aussie," said Mr Payn.
He said strong commodity prices were assisting exports and the economy in general. Figures such as today's tourism data, showing a 7 per cent rise in bed use, continued to surprise on the upside.
"Until you see some yield abatement, the trend will continue."
The big dollar picture was a bit clouded but the kiwi made ground on all the other crosses," he said.
At 5pm, it was buying 0.5362 euro (0.5344), 36.57 British pence (36.41), 71.51 yen (70.79), and 0.8240 Swiss francs (0.8200).
New Zealand's 6.25 per cent cash rate compares with 5.25 per cent in Australia, 1.5 per cent in the US and 2 per cent in the euro zone.
The trade weighted index rose to 66.74 (66.16), and the monetary conditions index was sharply up at 742 from 697.
T he Australian dollar closed against the greenback at US69.32c from its US69.89c opening. Meanwhile the euro closed at US$1.2177 (US$1.2094) while the greenback was fetching 109.45 yen (109.50 yen).
In the money market, rates rose except at the long end of the curve. The 90-day bank bill yields rose to 6.62 per cent (from 6.57 per cent) while in the bond market the February 2006s rose to 6.25 per cent (6.19), July 2009s to 6.19 per cent from 6.18 per cent and April 2013s fell to 6.16 per cent from 6.18 per cent.
- NZPA
<i>Currency:</i> Tough talking RB sends kiwi racing higher
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