NZ dollar rebounds; traders focus on US economic support measures

The kiwi has been mostly tracking the US share markets of late

The New Zealand dollar rebounded in line with US equities markets as traders focus on economic support measures and economies reopening rather than the worsening coronavirus pandemic in the world's largest economy.

The kiwi was trading at 64.42 US cents at 5pm in Wellington from 64.17 cents at the same time yesterday and from 64.05 cents in New York last Friday. The trade-weighted index was at 71.36 from 71.15.

"The reality is people are still torn between the free-money future and the reality of the virus," said Mike Houlahan, a dealer at XE, referring to the economic support measures in the US.

"There's talk they're going to extend the unemployment subsidy to the end of the year," Houlahan said. At present, those receiving unemployment benefits in the US are being paid an extra US$600 a week for up to six months.

Data released overnight showed another 1.48 million people in the US filed for unemployment insurance, the 14th consecutive week in which more than a million people have filed claims, bringing the total over those 14 weeks to about 47 million.

Currencies such as the kiwi, which are usually regarded as riskier, have been mostly tracking the US share markets of late.

"The US share market has been the best barometer of overall risk sentiment" through the pandemic, Houlahan said.

The S&P 500 index, the benchmark US stock index, rose 1.1 percent overnight. Locally, the S&P/NZX 50 index closed barely changed.

The US reported a record 40,184 new covid-19 infections on Thursday as cases continue to soar in states including California, Texas, Florida and Arizona.

So even as the worst-hit states in the early stages of the pandemic, including New York, continue reopening their economies, Texas, New Mexico, Arizona and Florida have all halted their momentum towards returning to pre-pandemic levels of economic activity.

New Zealand recorded one more case of infection today, of yet another traveller from overseas, as all the recent cases have been, and which brings the total number of cases to 1,170.

The kiwi dollar was trading at 93.47 Australian cents from 93.48 at 5pm yesterday, at 51.81 British pence from 51.69 pence, at 57.38 euro cents from 57.04 cents, at 68.99 yen from 68.76 yen and at 4.5583 Chinese yuan from 4.5420 yuan.

The bid price on the two-year swap was at 0.1950 percent from 0.1875 percent, while the 10-year swap was at 0.7525 percent from 0.7225 percent yesterday.