Tasman dollars on a high

Chris Timms
Chris Timms
The transtasman currencies both reached 10-month highs yesterday, despite the best intentions of the New Zealand and Australian central banks.

Both reserve banks have kept their official cash rates low this year and more cuts are expected from the Reserve Bank of New Zealand, perhaps as early as next week. In theory, the value of the dollar should fall when interest rates fall.

However, the New Zealand dollar rose as commodities continued their rally and as prices for the country's biggest export, dairy, rose in yesterday's GlobalDairyTrade auction.

The kiwi reached a high of US70.54c during the day and the trade-weighted index rose to 73.78 from 73.06 on Tuesday. However, the dollar had fallen to US70.06c by 5pm yesterday.

Craigs Investment Partners broker Chris Timms said the New Zealand dollar started the year at US64.5c but had risen nearly 10% this year, despite an easing interest rate environment.

‘‘It doesn't seem to matter what the Reserve Banks do with interest rates. The cuts in official cash rates have not made an impact on the currency at any stage.''

The NZ-US dollar cross rate now sat at its highest level since mid-June last year. The TWI was 4% above the Reserve Bank's projections for the current quarter average, as at its March Monetary Policy Statement, he said.

The local currency increased to 62.03 euro cents from 61.79c on Tuesday after European Central Bank figures showed the region's credit conditions eased in the first quarter.

The kiwi was little changed at 48.95 British pence but increased to A90.14c after the release of minutes from the Reserve Bank of Australia's policy review showed the bank's board viewed its current stance as ‘‘very accommodative'', a step up from its previous view of being simply accommodative.

In Australia, rising oil, copper and iron ore prices helped push the currency to a fresh high of US78.12c.

Reports Iran might be in a position to cut oil output with other producers, to help support crude prices, helped boost other commodities.

Westpac senior market strategist Imre Speizer said the currency was also being supported by copper prices, up 2.7%, and iron ore, up 4.1%.

The weaker US currency also lent support to the Australian dollar.

‘‘Daily momentum remains positive and the latest phase of this multi-month rally doesn't yet looked stretched,'' Mr Speizer said in a market note.

Congestion was expected in the US78.5c to US79.4c range.

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