Netty Idayu Ismail
@NettyIsmail
Lilian Karunungan
lilianten
September 8, 2016 — 12:35 PM AEST Updated on September 8, 2016 — 1:36 PM AEST
Kiwi advances for seventh day after reaching May 2015 high
Milk prices drive gains as New Zealand rate-cut odds recede
New Zealand’s dollar rose for a seventh day versus the greenback, its best winning streak since June, as bets the Federal Reserve will move slowly in raising interest rates enhanced the allure of the highest yielding developed-market currency.
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The kiwi has outperformed its Group-of-10 peers this month and strengthened toward parity versus the Australian dollar as milk prices recovered. The probability that the Reserve Bank of New Zealand will cut its key rate this month from a record low has dropped to 21 percent from 33 percent in mid August, interest-rate swaps show. Asset-purchase programs from Japan to the euro area have kept borrowing costs low worldwide, with most economists predicting that the European Central Bank will lengthen quantitative easing for a second time when policy makers meet Thursday.
“The kiwi is finding support from various sources that don’t seem likely to falter near term,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “Receding hopes for a Fed rate hike in December make the 2 percent New Zealand cash rate look more tempting.”
The kiwi climbed 0.1 percent to 74.55 U.S. cents as of 12:35 p.m. in Tokyo, adding to a 3.2 percent rally over the past six-days. It reached 74.86 cents on Wednesday, the highest versus the greenback since May 2015. Against the Australian dollar, the New Zealand currency rose 0.1 percent to NZ$1.0291, after reaching its strongest intraday level since April 2015 on Wednesday.
Traders are pricing in a 22 percent probability of a rate hike at the Fed’s Sept. 20-21 meeting, futures contracts indicate, after recent disappointing U.S. data.
“The New Zealand dollar end is well understood — the economy is accelerating, our interest rates look fabulous for investors in a relative comparison, and our commodity prices are recovering,” Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand Ltd., wrote in a client note. “But the broad path of the U.S. dollar is clearly important too.”