Kiwi strong as investors still favour NZ

The kiwi rose to 74.12 US cents as at 8am in Wellington from 73.16 cents. Photo / File

The New Zealand dollar is heading for a 1.1 per cent weekly gain against the greenback as the country's relatively high yields continue to attract investors in search of decent returns in a world where major central banks are running near-zero interest rate policies.

The kiwi rose to US72.70c at 5pm yesterday from US71.89c on Friday in New York last week. It was down from US72.91c at 8am and US72.88c on Thursday.

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The trade-weighted index is heading for a 0.7 per cent weekly gain, trading at 76.85 from 76.31 last week, and little changed from 76.80 on Thursday.

Investors' expectations for future US rate hikes dimmed this week after minutes to the Federal Reserve's last policy meeting showed little desire to tighten.

That has left New Zealand an attractive place for international investors with an economy enjoying booming tourism and building activity and a Reserve Bank yet to exhaust conventional monetary policy.

The yield on New Zealand's 10-year government bonds at 2.23 per cent remains more attractive than Australia's equivalent government bond, which was recently at a yield of 1.93 per cent, and US 10-year Treasuries' yield of 1.55 per cent.

"The kiwi is still at elevated levels and the Reserve Bank still won't like it, but until they lower rates is going to stay attractive," said Michael Johnston, senior trader at HiFX in Auckland."