Tuesday, July 26, 2011

Kiwi dollar bulldozes its way over US87c

The New Zealand dollar exchange rate bulldozed its way to yet another post-float high against the US dollar today, touching US87.08c as the greenback slumped.

The surge has left the kiwi within striking distance of doubling its nominal value - US44c - when it was floated in March 1985.

After spiking three times to US87c or above, the New Zealand dollar retreated a little to trade at US86.93c at 5pm, compared to US86.50c at the same time yesterday.

Reuters reported that stop-loss buy orders around the world were triggered following a rise in the exchange rate for the euro against the greenback. Such stop-loss orders were used to protect wealth by automatically placing a "sell" order when the price of a commodity - or currency such as the US dollar - dropped below a specified threshold.

The kiwi had earlier dipped to a relative "low" of US86.13 after weaker than expected trade data, but soared higher - with the Australian dollar and the euro - as speeches and statements by US politicians raised concerns over the political impasse in Washington.

US President Obama warned in an address to the nation that burgeoning US debt could cause serious damage to the world's largest economy if the Congress can't agree on raising the debt ceiling of US$14.3 trillion.

Investors poured into perceived safe-haven assets - such as the commodities-driven New Zealand and Australian currencies - and pushed gold to a record high and created an exchange rate for the Swiss franc at an all-time peak against the US currency.

"Stops were triggered in euro...that's taking everything higher," HSBC's NZ head of institutional sales Daniel Brdanovic told Reuters.

"We're not seeing really too much flows. People are still staying on the sidelines as much as possible...waiting for some resolution out of the US," he said.

The New Zealand dollar has risen over 5 per cent this month and 20 per cent this year. It was last at these levels in mid-1981, when the currency was still regulated by the Muldoon Government's central bank. The gains have been underpinned by improving economic data and expectations of interest rate rises.

At 5pm the NZ dollar was buying 0.6005 euro, down a little on yesterday's level at the same time of 0.6017 euro, while slipping to A79.63c against the Australian dollar from A79.96c, and to 67.86 yen from 67.89, over the same period.

The trade weighted index was 74.07 at 5pm from 74.06 yesterday.

ANZ bank said that the NZ dollar remained a currency in vogue.

Across the Tasman, Reserve Bank of Australia governor Glenn Stevens did little to dampen expectations of another interest rate rise. The central bank chief said Australian consumer spending would eventually ramp up from the sluggish pace of recent years, and the shift could come soon if some uncertainties over the global outlook were to ease. The Australian dollar was US$1.0918 at 5pm, from US$1.0818 at the same time yesterday.

The euro rose to US$1.4477 at 5pm, from US$1.4375 yesterday, and the Japanese currency also strengthened against the US dollar to 78.07 yen, 78.48 yen.


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