NZ dollar rises from two-year low

Last week, the NZ dollar hit its lowest level in two years. Photo/123RF.

The New Zealand dollar rose from a two-year low after European Union leaders announced restrictions on migrants, boosting the euro and weighing on the greenback.

The kiwi dollar traded at 67.72 US cents as at 8:30am in Wellington from 67.64 cents in late New York trading on Friday. It sank as low as 67.34 cents last week, the lowest since June 2016. The trade-weighted index rose to 72.35 from 72.21.

The 28 EU leaders agreed to set up migrant processing centres and take collective responsibility for the flood of people from the Middle East and Africa heading to the regional economic bloc. The euro gained on speculation the migrant measures would shore up German Chancellor Angela Merkel's support base although over the weekend, conservatives within her coalition dismissed the agreement as ineffective. US data was mixed on Friday, with a stronger than expected Chicago PMI, while in New Zealand, economists have dialled back their expectations for any rate hike by the Reserve Bank.

"EUR rose sharply and this spilled over into other currencies, with traders taking up the opportunity to close short positions," said Jason Wong, a currency strategist at Bank of New Zealand. "The USD seemed to be the main casualty and it lost further ground in Friday night trading. The weekend news could see some of this price action reverse course as the new week begins."

The kiwi rose to 58.20 euro cents from 58.02 cents on Friday in New York.

With no economic data scheduled in New Zealand today, traders may seek leads from Japan's Tankan survey for the second quarter and China's Caixin PMI manufacturing survey.

Following the Reserve Bank's decision to keep the official cash rate unchanged at 1.75 per cent last week, traders deemed the bank "had kept an open mind about a possible easing," Wong said. And the market was now not pricing in a full rate hike until March 2020 "some five months out compared to pre-OCR review pricing".

The local currency rose to 91.53 Australia cents from 91.29 cents on Friday in New York and gained to 4.4811 yuan from 4.4732 yuan. It was little changed at 74.83 yen from 74.84 yen and traded at 51.45 British pence from 51.30 pence.