The New Zealand dollar rose to a four-month high against its Australian counterpart and gained against the greenback after a more upbeat assessment by the Reserve Bank yesterday stoked investors' appetite for the local currency.
The kiwi rose as high as 80.63 Australian cents and traded at 80.48 cents at 8am in Wellington from 80.31 cents yesterday. It climbed to 84.10 US cents from 83.67 cents yesterday.
Reserve Bank governor Graeme Wheeler is set to deliver a speech on improving New Zealand's economy today after holding the official cash rate at 2.5 per cent and pointing at the nation's expected recovery over the coming year.
The statement was interpreted by markets as more hawkish, meaning the bank is unlikely to cut interest rates, and increasing investors' appetite to invest in a stable economy.
"New Zealand is one of the few countries that have quite a positive outlook outside East Asia," said Imre Speizer, market strategist at Westpac Banking. "Outside Asian currencies and the kiwi it's hard to see where you'd want to go to make a risk-on currency trade."
The local currency was deemed to be fair value at about 83 US cents according to the Economist magazine's Big Mac index, which measures the average price of the McDonald's burger.
Australia's currency was knocked yesterday by Standard & Poor's warning the nation's economy faces a potential slow-down as the resources boom fades away.
"The kiwi does look promising, and against the Aussie dollar it looks more promising," Speizer said.
Investors will be looking at Chinese manufacturing figures and US employment data today, with local migration figures unlikely to attract much attention.
The kiwi dollar climbed to 76.81 yen at 8am in Wellington from 75.87 yen yesterday, and increased to 61.94 euro cents from 61.50 cents. It rose to 53.02 British Pence from 52.80 pence yesterday.
The trade-weighted index advanced to 75.58 from 75.06 yesterday.