NZ dollar holds gains on vaccine optimism

The kiwi lifted overnight and traded at 65.61 US cents at 5pm in Wellington. Photo / Getty Images

The New Zealand dollar held its gains on some global optimism about possible covid-19 vaccines.

The kiwi lifted overnight and traded at 65.61 US cents at 5pm in Wellington from 65.54 cents at the same time yesterday. The trade-weighted index was at 72.12 from 72.14.

Investors were upbeat after positive data from trials of several potential covid-19 vaccines, including a closely watched trial from Oxford University and AstraZeneca.

The experimental coronavirus vaccine triggered an immune response against covid-19 in study participants, and it has only minor side effects, according to The Lancet.

"Global markets are focused on various vaccines in the pipeline against covid-19, the risk-on sentiment took price action to resistance levels," said Stuart Ive, treasury manager for OMF.

Kiwibank dealer Mike Shirley said the kiwi faces initial resistance around 65.80 US cents and then at 66 cents.

Ive noted, however, that a lack of local data and some "dovish" minutes from the Reserve Bank of Australia "took some of the shine off."

The RBA's July 7 policy meeting minutes showed the bank's board saw no need to adjust the current policy package, which includes a 0.25 per cent cash rate and a target of 0.25 per cent for the yield on three-year Australian government bonds.

However, it will "continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted."

Global markets were also cheered when European Union leaders finally managed to hammer out a coronavirus relief plan after a marathon summit.

Looking ahead, the overnight Global Dairy Trade auction will be closely watched, in particular after the strong rise in the previous auction when the average prices across all products climbed 8.3 per cent.

The NZX Dairy Derivatives market is signalling weaker prices across the board with the exception of anhydrous milkfat.

Whole milk powder – which makes up the bulk of the auction – is expected to slide by about 0.6 percent.

"After the surge in prices at the last GDT auction, it appears likely the market will take a pause, looking for direction at this week's auction," OMF said in a monthly NZ dairy report.

Should dairy prices rise "and the equity rally pushes higher, then a break of 66 US cents could well be on the cards," said Shirley.

The kiwi traded at 93.47 Australian cents from 93.78 cents yesterday, 70.41 yen from 70.29 yen, 4.5870 Chinese yuan from 4.5819 yuan, 57.40 euro cents from 57.26 cents, and 51.84 British pence from 52.29 pence.

The bid price on the two-year swap rate was 0.1950 per cent from 0.1650 per cent yesterday, while 10-year swaps were at 0.6725 percent from 0.6750 per cent.