The New Zealand dollar held above 70 US cents as Finance Minister Steven Joyce's maiden budget met investors' expectations in affirming a strong economic outlook, allowing tax adjustments and a hike in infrastructure spending.
The kiwi traded at 70.41 US cents at 5pm in Wellington from 70.43 cents at 8am, up from 69.94 cents yesterday. The trade-weighted index advanced to 75.98 from 75.79 yesterday.
The Treasury's latest forecasts predict New Zealand's economic growth will peak in 2019 at an annual pace of 3.9 per cent, spurred on by strong migration and a heavy construction pipeline. The pace of economic growth filled the government's coffers more than expected, giving Joyce room to return cash to taxpayers through higher income thresholds for the lowest tax bands while spending the rest in a $32.5 billion infrastructure pipeline over the next four years.
"Expectations were building towards today and that the numbers were looking pretty good, which proved to be the case," said Phil Borkin, an economist at ANZ Bank New Zealand. "That was already in the price, and there wasn't much to surprise the market, hence the kiwi's lack of movement."
The local currency got a boost overnight when minutes to the US Federal Reserve's policy review earlier this month raised some uncertainty about whether the US central bank will raise interest rates next month, which also pushed down the yield on US 10-year treasuries.
