NZ dollar soars as reopening optimism sweeps the globe

The kiwi was trading at 64.10 US cents at 5pm. Photo / 123RF

The New Zealand dollar continued to rise as sentiment in global equities markets remained relentlessly positive about the global economy reviving with countries emerging from Covid-19 lockdowns.

The positive sentiment, which ignores still-increasing Covid-19 cases and social unrest in the US, as well as US President Donald Trump's threats to set the army on protesters, has also led to wholesale selling of US dollars, pushing other currencies, including the New Zealand dollar, higher.

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The kiwi was trading at 64.10 US cents at 5pm in Wellington, after hitting 64.30 cents earlier, up from 62.80 cents at the same time yesterday. The trade-weighted index was at 71.14 from 70.12 yesterday.

"The dollar's being sold across the board," said Tim Kelleher, head of foreign exchange sales at Commonwealth Bank of Australia, adding that the Australian dollar is also significantly stronger. "We haven't been this high on the kiwi since March 9 and by March 19 we had dropped to 55 cents," he said.

"I can't imagine the Reserve Bank would be happy about that or the RBA either."

With the outlook for both countries' exports very dependent on the global economy, strong currencies would only exacerbate the impact of weak demand.

Nevertheless, Australian and New Zealand equities markets have been as buoyant as in the US and apparently just as dismissive of bad news.

For example, figures released in Australia today showed that the economy shrank 0.3 per cent in the March quarter and Australian Treasurer Josh Frydenberg said the drop in the current quarter will be much greater, meaning that Australia is in recession.

"Based on what we know from Treasury, we're going to see a contraction in the June quarter which is going to be a lot more substantial than what we have seen in the March quarter," Frydenberg told journalists.

But on the positive reopening front, Prime Minister Jacinda Ardern outlined what life will be like when NZ moves to alert level 1, probably next week.

Just about all restrictions, including on how people shop, dine out, attend entertainment events, are seated on buses and planes, and attend large gatherings such as weddings and funerals, look likely to be lifted just before midnight on Wednesday next week.

The borders will remain closed, however, to all but a few specially exempted workers and people granted entry to New Zealand on family reunification grounds.

The New Zealand dollar was trading at 92.44 Australian cents from 92.45 cents yesterday. It was at 50.92 British pence from 50.31 pence, at 57.20 euro cents from 56.43 cents, at 69.56 yen from 67.63 yen, and at 4.5583 Chinese yuan from 4.4716 yuan.

The bid price on the two-year swap rate was 0.2100 per cent from 0.1725 per cent yesterday, while 10-year swaps were at 0.7900 per cent from 0.7325 per cent.