News Column

NZ Dollar Surges Up As RBNZ Hikes Rate By 25 Bps To 3.25%

June 11, 2014

CANBERA (Alliance News) - The NZ dollar firmed up against its key counterparts in early Asian deals on Thursday, as the Reserve Bank of New Zealand hiked its official cash rate by 25 basis points to 3.25%, and signaled further tightening in future depending on economic data and inflationary pressures.

The decision was in line with expectations, and it marked the third straight meeting in which the RBNZ has hiked the OCR.

"New Zealand's economic expansion has considerable momentum, with GDP estimated to have grown by around 4% in the year to June. Global financial conditions remain very accommodative and are reflected in low long-term interest rates and narrow risk spreads. Economic growth among New Zealand's trading partners is gradually improving and global inflation remains low," Reserve Bank Governor Graeme Wheeler said in a statement that accompanied the decision.

The bank said it would continue additional tightening - although the pace of the increase will be determined by the trend of economic data.

"The speed and extent to which the OCR will need to rise will depend on future economic and financial data, and its implications for inflationary pressures. By increasing the OCR as needed to keep future average inflation near the 2% target mid-point, the Bank is seeking to ensure that the economic expansion can be sustained," Wheeler said.

The kiwi added almost 1% to hit more than a 1-year high of 1.5649 against the euro, reversing from an early low of 1.5807. On the upside, 1.545 is seen as next resistance level for the kiwi.

The kiwi climbed to 0.8651 against the greenback, its strongest since May 19, and was 1.6% higher than an early 2-day low of 0.8517. If the kiwi extends gain, it may face resistance around the 0.87 zone. The kiwi-greenback pair was quoted at 0.8533 at yesterday's close.

The kiwi approached a 4-week high of 88.29 against yen, after having fallen to 87.19 at the beginning of Asian deals. The next possible upside target for the kiwi is seen around the 89.00 mark.

The NZ currency moved up to a fresh 2-week high of 1.0813 against the aussie, off its prior low of 1.0952. The kiwi is likely to find resistance at the 1.076 level.

The unemployment rate Australia remained stable for the third consecutive month in May, a report from the Australian Bureau Of Statistics showed today.

The unemployment rate came in at 5.8% in May, the same rate as in April and March. Meanwhile, the number of employed people fell 4,800 over the month to 11,564,600.

Looking ahead, German wholesale price index for May, ECB monthly report and Eurozone industrial production for April are due in the European session.

US advance retail sales and import price index for May, as well as weekly jobless claims for the week ended May 7 are set for release in the New York session.

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Source: Alliance News

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