The New Zealand dollar is close to its peak cross rate with
the Australian currency, BNZ currency strategist Kymberly
Martin said yesterday.
The ''significant jump'' in the value of the dollar to around
A94.5c late this week was due to the Australian employment
reporting disappointing the market, she said.
The Australian monthly unemployment rate remained steady at
5.8% but only because the participation rate - the proportion
of the population with a job, looking for one or who were
ready to start work - fell to 64.6%.
The Australian dollar dipped as low as US87.77c following the
announcement after the economy lost 68,000 fulltime jobs last
Ms Martin said the rise in the kiwi also reflected the New
Zealand economy going from strength to strength and the
market pricing-in rate hikes of the official cash rate by the
''Contrast that with the Australian economy which is showing
slowing growth and mining sector growth peaking. The Reserve
Bank of Australia is forecast to cut interest rates.
''Our dollar is now well priced.''
The BNZ ''fair value'' for the dollar was A87c, but that did
not mean it would fall back to that value any time soon, Ms
Martin said in an interview.
The currency was being held up by the fundamentals of a
strong economy and the momentum was clearly with the
''I don't think it has much further to go. We need to keep
our rational hat on,'' she recommended.
Asked what the effect on the currency would be if the New
Zealand central bank increased its official cash rate from
2.5% and the Australian Reserve Bank cut its to below 2.5%,
Ms Martin said most of the movements had been priced in.
The New Zealand swap rates had been moving up as markets
anticipated the rate hikes. The consensus was the OCR would
move up by 1.15% this year to 3.65% but the BNZ had priced in
a rise to 3.75%.
A rate hike should not drive the currency higher, she said.
New Zealand's ''good news story'' was now well understood and
priced by the market. Significant upside surprises would
likely be increasingly difficult to muster in the near-term.
Her core view saw the New Zealand-US dollar cross well
supported through the first half of the year.
''Broadly, we see the current US81c-US84c trading range
sustaining over this period. It is not later in the year we
anticipate the NZ-US dollar cross to decline.''
The BNZ end-year target remained at US77c.