The New Zealand dollar continued to confound currency watchers yesterday, extending its gains over the last month to climb within a whisker of US60c.
Early yesterday morning it spiked to a four-month high against the greenback at US59.91c, helped in part by better-than-expected local employment data.
Falling away during the
early part of yesterday's local session, it rallied later in the day to close at US59.36c.
Westpac markets strategist Imre Speizer said the kiwi's spike higher was largely down to the outcome of meetings by the European Central Bank and the Bank of England overnight, with the ECB proving particularly influential.
Speizer said markets had expected the central bank to unveil policies equivalent to a form of quantitative easing which would effectively serve to debase the euro.
However, the ECB instead introduced measures to make credit more available without effectively increasing the money supply. That served to strengthen the euro and risk currencies, including the kiwi against the US dollar.
With a number of factors, including the near-term outlook for US equities evenly poised, Speizer was reluctant to try and pick the kiwi's next move.
ANZ, however, said a test and break of the US60c level was a matter of time in an environment where there was little demand for the US dollar.
But BNZ currency strategist Danica Hampton said the kiwi looked overstretched at US60c and downside risks were building. She was looking for a pull back to at least US55.50c in coming weeks.
Hampton said the kiwi's gains in recent weeks were attributable to an improvement in global sentiment, with economic data from developed countries now tending to beat expectations and early signs of expanding production in India and China.
"Recovering risk appetite has seen investors buy growth-sensitive currencies like the New Zealand dollar against 'safe haven' currencies like the US dollar and Japanese yen."
The local unit had also benefited from "a general sense the New Zealand economy will come out of the global recession in relatively good shape" although "recent musings about a recovery are a bit hasty".
