NZ dollar gains as RBNZ lifts rates

There was no surprise when the Reserve Bank of New Zealand hiked its official cash rate on Thursday but the NZ dollar rose anyway.

The New Zealand dollar gained against other currencies after Reserve Bank of New Zealand governor Graeme Wheeler raised the official cash rate as expected.

The NZ dollar rose to 86.24 US cents at 5pm from 85.92 cents at 8am and 85.94 cents on Wednesday. The trade-weighted index advanced to 80.21 from 79.99.

Mr Wheeler hiked the OCR a quarter-point to 3 per cent, his second 25 basis points increase in as many months, as he looks to head off inflationary pressures.

Noting the strength of the Kiwi dollar was unsustainable and holding back tradable inflation, the central bank raised its estimate for gross domestic product growth to 3.5 per cent in the year ended March 31 from a previous forecast of 3.3 per cent last month.

"If anything, the RBNZ is very happy with the current situation apart from the currency, which there's very little it can do about," said Stuart Ive, senior client adviser at OMF.

"At least they're not half-heartedly trying to jawbone the currency down when everyone knows it's going to have a very muted impact," he said.

They Kiwi dollar was also underpinned by the upward revision of the growth forecast.

New Zealand and Australian markets will be closed on Friday for the Anzac Day public holiday, leaving traders to focus on the German IFO business sentiment survey, and a speech by European Central Bank president Mario Draghi.

The US Federal Open Market Committee policy review meeting, US employment data, and Chinese manufacturing figures will attract attention next week.

The local currency was little changed at 88.21 yen at 5pm from 88.15 yen on Wednesday, and rose to 92.76 Australian cents from 92.59 cents. It increased to 62.38 euro cents from 62.22 cents, and advanced to 51.36 British pence from 51.07 pence.


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2 min read
Published 24 April 2014 3:29pm
Updated 24 April 2014 3:32pm
Source: AAP

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