JASON KRUPP Last updated 08:08 26/01/2012
The New Zealand dollar rose against the greenback ahead of today's Official Cash Rate announcement, tracking in line with Wall Street where a commitment by the Federal Reserve to keep interest rates on hold longer boosted risk appetites.
The kiwi recently traded at US$81.37 cents, up from US$80.98c at 5pm yesterday, and rose to 71.93 on the trade weighted index of major trading partners' currencies, from 71.85 previously.
Following the close of the two-day Federal Open Market Committee meeting in New York, the US central bank committed to keeping US interest rates on hold through to the end of 2014 in a bid to boost the glacial pace of growth in the world's biggest economy.
Currently at 0.25 per cent, the move to lock in rates at near zero was seen as a bid to boost longer term lending, which met with favour on Wall Street. In afternoon trade the Standard & Poor's 500 Index pared early losses to recently trade 0.4 per cent higher at 1319.21.
The Fed announcement saw markets swing to risk-on mode, with growth-linked currencies such as the Australian dollar and kiwi gain, and also saw the euro reverse losses seen in the early part of the offshore session.
"Until the US central bank's meeting an hour ago, markets were on the back foot, weighed by renewed speculation Portugal will need another rescue package, a mediocre US earnings season, and weak US home sales," said Imre Speizer, a market strategist at Westpac.
Locally, the Reserve Bank of New Zealand is also widely expected to keep interest rates on hold at the historically low level of 2.5 per cent when it makes its rates announcement later this morning. That's in response to the worsening macroeconomic conditions, with rates likely to remain at these low levels into 2013.
"RBNZ's OCR Review will attract global attention," said Speizer. "We expect largely a 'cut-and-paste', with little market impact."
The yen slid to a two-month low against the US dollar after Japan posted its first annual trade deficit since 1980. That raised questions about how much longer the country can rely on exports to help finance its huge public debt without turning to foreign investors.
On the crosses, the kiwi recently traded at 76.84 Australian cents, down from A76.94c yesterday, and it rose to 63.24 yen from 63.12 yen. It was little changed at 62.19 euro cents from 62.15 euro cents previously, and rose to 52.03 pence from 51.84 pence.
The currency may trade between a range of US80.60c and US81.30c, according to an ANZ report.
http://www.stuff.co.nz/business/market-data/currencies/6315931/NZ-dollar-gains-ahead-of-OCR-announcement
