NZ dollar rallies on optimism for global growth, FOMC looms

NZ dollar rallies on growing optimism for global growth, FOMC looms

By Paul McBeth

March 13 (BusinessDesk) – The New Zealand dollar rallied in the local trading session amid growing optimism the US will help drive global growth, ahead of the Federal Open Market Committee meeting on Tuesday in Washington DC.

The rose to 82.30 US cents at 5pm from 81.69 cents at 8am, and was up from 81.79 cents yesterday. The trade-weighted index gained to 73.27 from 72.89.

Investors are speculating the FOMC will be more bullish on US growth in its monetary policy statement this week, pushing up risk-sensitive assets.

Stocks across Asia rallied amid expectations of a more upbeat US growth outlook, with Japan’s Nikkei 200 up 1 percent to 9,990.84, Hong Kong’s Hang Seng up 1.1 percent to 21366.01 and Australia’s S&P/ASX 200 up 1.2 percent to 4242.4 in afternoon trading.

Traders have started betting on an increase in the Fed Funds rate from its near-zero setting, pricing in 17 basis points of increases over the coming 12 months, according to the Overnight Index Swap curve.

“People in the marketplace are getting a bit bullish and I think they are expecting the FOMC will come out and be more positive about US data and global growth,” said Joseph Capurso, currency strategist at Commonwealth Bank of Australia in Sydney. “Commodity currencies like the kiwi and Aussie have started to lift,” on that optimism, he said, referring to the trans-Tasman currencies colloquially.

New Zealand’s economic recovery continues to seep into the local data, as better-than-expected housing figures helped stoke the appeal of the kiwi dollar with property values still climbing and sales numbers bouncing back from record lows last year.

Local food prices also rose faster than expected at 0.6 percent in February, according to government figures. The Reserve Bank last week talked down the threat of inflationary headwinds, saying the strong currency may force Governor Alan Bollard to keep the official cash rate lower for longer.

Traders are betting Bollard will hike rates by 16 basis points in the next 12 months, according to the Overnight Index Swap curve.

Capurso said CBA expects the kiwi dollar will head up towards 90 US cents next year when the Reserve Bank starts tightening monetary policy.

The New Zealand dollar was little changed at 62.41 euro cents from 62.49 cents yesterday, and climbed to 52.54 pence from 52.27 pence. It rose to 77.97 Australian cents from 77.60 cents yesterday, and advanced to 67.67 yen from 67.29 yen.

(BusinessDesk)

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