NZ dollar rebounds on hopes of Covid-19 receding

The kiwi was trading at 59.82 US cents at 5pm. Photo / 123RF

The New Zealand dollar rebounded as markets, particularly equities markets, took hope from signs that new infections with the Covid-19 virus are starting to taper in some of the worst-hit places such as Italy, Spain and New York.

The kiwi was trading at 59.82 US cents at 5pm in Wellington from 58.73 at the same time yesterday while the trade-weighted index was at 68.63 from 67.77.

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"With interest rate differentials at virtually nothing now, the New Zealand dollar's now a proxy for risk," said Mike Shirley, a dealer at Kiwibank.

That means when investors are in an upbeat mood, the currency tends to strengthen and vice versa.

The market is somewhat calmer than it has been of late with the domestic currency trading about a half US cent range, as opposed to the several cents seen last week, Shirley said.

"The other aspect playing out for the New Zealand dollar is all this upcoming debt issuance," he said.

The government will be selling bonds to help finance its various measures aimed at supporting the economy and cushioning it from the worst of the crisis and the nation's lockdown.

Trading "is all being driven by Covid-19 data and the way that's being interpreted. Any justification for a trade is probably as good as the next – you have to trade on something," he said.

"The market is drawing these inferences from data that it really has no business interpreting."

The latest statistics show Italy, for example, has seen daily new recorded infections recede from 6,557 on March 21 to 3,599 yesterday.

In New Zealand, the number of the newly infected is also tapering off from 89 on April 2 and April 5 to 54 today.

While 16,523 people have died of the virus in Italy, New Zealand has recorded only a single death.

The New Zealand dollar was trading at 97.27 Australian cents from 97.57 cents at 5pm yesterday. It was at 48.71 British pence from 48.04, at 55.25 euro cents from 54.30, at 65.07 yen from 63.98 and at 4.2327 Chinese yuan from 4.1644.

The bid price on the two-year swap rate closed at 0.4700 per cent from 0.4650 yesterday, while 10-year swaps were at 0.9850 per cent from 0.9150 per cent.