The kiwi dollar gradually advanced to session highs against its US counterpart on Thursday amid bets that the Reserve Bank of New Zealand (RBNZ) will probably be the first among central banks in developed nations to make a move towards raising its benchmark interest rate.
NZD/USD reached a session high at 0.8292 at 7:59 GMT, after which consolidation followed at 0.8290, gaining 0.56% for the day. Support was likely to be received at September 25th low, 0.8217, while resistance was to be encountered at September 24th high, 0.8360.
After having fallen earlier in the week due to risk of a possible US government shutdown, which lowered demand for higher-yielding assets, the New Zealand currency recorded gains against the US dollar, as Asian shares surged. “With all the talk about a U.S. government shutdown, everybody’s forgotten that the Reserve Bank of New Zealand is one of the most hawkish central banks out there,” said Annette Beacher, Singapore-based head of Asia-Pacific research at TD Securities Inc., cited by Bloomberg. “I’m not surprised that the kiwi has picked up a little bit. I think it’s got more to do.”
The MSCI Asia Pacific Index of shares rose 0.2%, making up for declines in two consecutive days.
Additionally, traders saw an 84% probability that the RBNZ will lift its benchmark interest rate from the already record low level of 2.5% by April next year. Yesterday the odds of such an action were 80%.
On Wednesday the kiwi was under selling pressure, also because the deficit on New Zealands trade balance widened to 1.191 billion NZD in August on a monthly basis and 2.06 billion NZD on annual basis, as both figures appeared to be the highest since September 2008.
Meanwhile, in a letter yesterday the US Treasury Secretary Jacob Lew told Congress, that the extraordinary measures, which have a purpose to avoid breaching the debt ceiling “will be exhausted no later than Oct. 17.”, Bloomberg imparted. According to Lew, the Treasury will have approximately 30 billion USD at its disposal to service the needs of the country. This forecast has been a revision down compared to last months projection, that the Treasury had about 50 billion USD, with which to fund the US government until mid-October. This was the first time, when Lew defined a specific deadline and gave lawmakers a target level, so that they could increase the debt limit, which is currently set at 16.7 trillion USD.
Elsewhere, the New Zealand dollar was gaining against the Aussie, with AUD/NZD cross falling 0.28% for the day to trade at 1.1339 at 9:03 GMT. The kiwi has appreciated 7.2% in September against the greenback and has increased its value by 7.1% so far in Q3, as it appeared to be the best performing currency among 16 major peers over both periods.
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