The New Zealand dollar rose to a week high against its Australian counterpart as the outlook for the local economy continues to outperform that of its closest neighbour.
The kiwi jumped as high as 86.23 Australian cents, and recently traded at 86.14 cents from 85.69 cents at the 5pm market close in Wellington yesterday. The New Zealand dollar edged up to 78.97 US cents from 78.61 cents yesterday.
The kiwi has advanced more than 8 per cent against the Australian currency this year as a revival in the local economy puts upward pressure on interest rates, while a slowdown in Australia puts downward pressure on rates across the Tasman. A business confidence report in Australia yesterday showed more firms were pessimistic than optimistic, contrasting with a New Zealand business confidence survey last week which showed local business confidence held at a three-year high.
"It has rallied up a lot," said Sam Tuck, senior manager FX at ANZ New Zealand. "The New Zealand dollar is much more in demand than the Australian dollar.
Our exporters seem to be doing better, the demand for soft commodities is holding up well. Whereas the Australian exporters have been somewhat absent from the market as they see less demand for their product."
ANZ's Tuck expects the kiwi to continue to rise against the Aussie, reaching about 88 Australian cents by the end of the year. Any dip to around 84 cents would be a good opportunity to buy, he said.
"People seem to be more happy to keep the New Zealand dollar elevated against the US dollar and happier on balance to sell the Aussie against the US dollar which drives the kiwi/Aussie cross higher," ANZ's Tuck said.
In New Zealand today, reports are due on tourist arrivals and credit card spending for June.
The New Zealand dollar rose to 79.33 yen from 78.69 yen yesterday and gained to 60.24 euro cents from 60.01 cents. The local currency advanced to 51.85 British pence from 51.77 pence while the trade-weighted index climbed to 74.98 from 74.65.