Feb. 10 (BusinessDesk) – The New Zealand dollar may extend its gains, buoyed by a recovery in dairy prices, relatively high interest rates and questions about the greenback’s ability to continue rising.
The kiwi traded at 74.33 US cents as at 5pm in Wellington, from 73.70 cents late yesterday. The trade-weighted index rose to 76.97 from 76.46.
The US Dollar Index has climbed about 16 percent in the past year, propelled by signs the world’s biggest economy is recovering at a time there are questions over growth in the eurozone, China and Japan. The greenback has rallied as investors focus on the prospect of the Federal Reserve raising interest rates from near zero this year, although major US companies including Microsoft and Google are now saying the currency’s advance could affect profitability.
“There’s lots of reasons for a strong US dollar,” said Derek Rankin, director at Rankin Treasury Advisory. ” But the debate is can the US dollar strengthen meaningfully from here.”
He cited the weak eurozone economy, which has weighed on the euro, saying economic data from the region “might start to improve quite quickly” given record low interest rates and stimulus from the European Central Bank.
The New Zealand dollar may trade in a range of 74 US cents to 75 US cents in the next 24 hours, Rankin said. “It does look like it wants to have a go higher,” especially since three negative weighing on the currency have receded. Those were a falling milk price, which has since started reversing, a Reserve Bank flagging a possible rate cut only to clarify that policy is in neutral, and a surging greenback.
The New Zealand dollar was little changed at 94.92 Australian cents from 94.84 cents yesterday and rose to 65.55 euro cents from 65 cents. It gained to 48.76 British pence 48.31 pence and traded at 88.06 yen from 87.56 yen.