NZD/USD peaks higher following RBNZ Governor’s statement

The kiwi advanced against the US dollar after the statement of Graeme Wheeler, Governor of the Reserve Bank of New Zealand (RBNZ).

Having reached a session high at 0.8292 at 06:15 GMT, NZD/USD traded at 0.8278 at 08:22 GMT, gaining 0.24% for the day. Support was to be received at December 11th low, 0.8201, while resistance was to be encountered at December 11th high, 0.8310.

On Thursday, RBNZ decided to maintain its benchmark interest rate at a record-low 2.5%, while remarking that the current level of stimulus is becoming unnecessary.

Reserve Bank of New Zealand Governor, Graeme Wheeler said in statement in Wellington today, cited by Bloomberg: “The bank will increase the official cash rate as needed in order to keep future average inflation near the 2 percent target midpoint, we want to send a message that we are serious about the policy objectives.” Wheeler added: “Our forecasts suggest the cash rate will need to increase around 2 1/4 percent over the next 2 1/4 years.”

The accelerating economic growth and a housing boom in New Zealand will probably help the country to become one of the first developed nations, which starts raising borrowing costs.

In October, Graeme Wheeler announced that increases in the key rate “will likely be required in 2014”.

Last week, in a Bloomberg News survey 10 out of 15 economists expected a rate increase by March 31st next year, while only three expected a rise in April and two voted for June. None forecast a change today. According to another swaps data compiled by the same media, there is a 87% chance of a rate increase by March.

The kiwis high exchange rate is supported by speculations for raising interest rates somewhere in the future, but it is still not known when this will be used, which actually makes it a powerful tool.

Statistics New Zealand reported on November 6th, that employers added 27 000 jobs in the third quarter, the most in more than six years.

Another report by the Real Estate Institute today, showed house prices rose 9.6 percent in November from a year earlier.

New Zealands economy is boosted by construction and an increased spending from rising house prices. The central bank revised upwards its forecast for the year through March 2015 to 2.8% from initially estimated 2.3%. After that the economy is expected to slow the pace of expansion to 2.1% by March 2016.

According to Bloomberg Correlation Weighted Indexes, which track 10 developed nation currencies, the kiwi had climbed 3.3 percent this year.

Meanwhile, yesterday US policymakers unveiled an agreement to ease automatic spending cuts by about 60 billion USD over two years and cut nation’s deficit by 23 billion USD. US Senator Patty Murray, a Democrat, and Republican Representative Paul Ryan said that the budget proposal could prevent a government shutdown and could favor economy. The agreement sets a budget ceiling for the fiscal 2014 at 1.012 trillion USD and for the fiscal 2015 – a ceiling at 1.014 trillion USD.

The US budget agreement boosted speculations that the Fed might taper its stimulus program, which tends to devaluate the greenback. Central bankers are set to reconvene next week. According to 34% of economists, participated in a Bloomberg survey on December 6th, the FOMC may begin to scale back its 85-billion-USD monthly asset purchases at the committee’s policy meeting on December 17th-18th rather than wait until January or March.

Later today, investors awaited the release of important data about the US economy. Reports on retail sales, retail sales less autos for November, initial jobless claims for the week ended December 7th, the monthly and annual Import Price Index for November and the Business Inventories for October are all expected to be released.

Elsewhere, AUD/USD slid to a session low at 0.9011 at 3:50 GMT, after which consolidation followed at 0.9025, losing 0.27% for the day. Support was likely to be received at December 6th low, 0.8990, while resistance was to be encountered at December 11th high, 0.9152.