News Column

NZ Dollar Advances Against Majors

July 31, 2014

CANBERA (Alliance News) - The New Zealand dollar climbed against its major opponents on Thursday, as investor sentiment rose in reaction to the US Federal Reserve's upbeat assessment of the US economy, while reiterating that it won't rush for a rate hike.

The Federal Reserve further cut its asset purchase program by another USD10 billion, noting the US economy has rebounded in the second quarter. In the accompanying statement, the Fed said its current federal funds rate target of zero to 0.25% will stay low "for a considerable time" after the asset purchase program ends and employment figures improve.

"The Committee sees the risks to the outlook for economic activity and the labour market as nearly balanced and judges that the likelihood of inflation running persistently below 2% has diminished somewhat," the Fed noted. However, the policy makers cautioned that a range of indicators "suggests that there remains significant underutilization of labor resources," even as the unemployment rate dropped to 6.1% in June.

The Fed provided few clues about the timing of any tightening cycle.

In economic news, New Zealand's money supply increased at a faster pace in June, figures from the Reserve Bank of New Zealand showed.

M3 money supply, the broadest measure of money supply, rose 5.4% year-on-year to NZUSD272.5 billion in June. This follows a 5.2% rise in May

The kiwi, which ended Wednesday's trading at 0.8489 against the greenback and 1.5769 against the euro, advanced to 2-day highs of 0.8516 and 1.5726, respectively. On the upside, the kiwi may find resistance around 0.86 against the greenback and 1.56 against the euro.

The kiwi spiked up to a 1-week high of 1.0947 against the aussie, compared to Wednesday's closing value of 1.0985. If the kiwi extends gain, 1.09 is seen as its next possible resistance level.

The NZ currency rose to 87.49 against the Japanese yen, its strongest level since July 24. Further rally of the kiwi may see it finding resistance around the 88.00 zone. At Wednesday's close, the pair was valued at 87.25.

Japan's housing starts declined less than expected in June, data revealed.

Housing starts dropped 9.5% year-over-year in June, a slower rate of decline than the 15% fall in May, the Ministry of Land, Infrastructure, Transport and Tourism said.

Looking ahead, Eurozone CPI for July and jobless rate for June are due in the European session.

The US weekly jobless claims for the week ended July 26 are due in the New York session.

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Source: Alliance News

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