Dollar rises as pickup in commodities, share market gains stoke risk appetite

The New Zealand dollar rose along with other so-called commodity currencies, on optimism China has managed to arrest a slide in its stock market, helping drive a global rally in equities and prices of commodities.

The kiwi increased to 63.71 US cents at 5pm in Wellington, from 62.76 cents late yesterday. The trade-weighted index rose to 69.31 from 68.49 yesterday.

Share markets rose across the Asia Pacific region, following gains on Wall Street as the Shanghai Composite Index extended its increase from the lows of late August. The Thomson Reuters/CC CRB Index of 19 commonly traded commodities rose about 0.9 percent, while Brent crude oil and gold futures gained.

"It's really a risk-on move across the board and commodity currencies have benefitted, and the US dollar has been sold," said Alex Hill, head of corporate trading at NZForex. "We saw commodities rebound and stock markets had a decent run. Bargain hunters are looking at some of these risk assets and there's a bit of buying."

There was also speculation the US Federal Reserve may be less inclined to hike interest rates at its meeting next week. High-profile Fed watcher Jon Hilsenrath wrote in the Wall Street Journal that ahead of the meeting, Federal Reserve officials have been avoiding giving any signals either way on rates, which suggests no increase is contemplated, because in the past they have telegraphed such moves.

The Reserve Bank of New Zealand is widely expected to cut the official cash rate a quarter point to 2.75 percent tomorrow and traders said such a move is priced into the kiwi dollar. They'll be watching for clues to further rate cuts and expect the central bank will lower its track for economic growth.

"If they don't cut rates tomorrow, we will see the kiwi kick higher," Hill said.

The New Zealand dollar advanced to 90.30 Australian cents from 90.17 cents yesterday. The kiwi rose to 57.04 euro cents from 55.97 cents yesterday, and increased to 41.40 British pence from 40.97 pence. It rose to 76.159 yen from 74.72 yen and gained to 4.0597 yuan from 3.9961 yuan.

The two-year swap rate rose 2 basis points to 2.82 percent and 10-year swaps rose about 4 basis points to 3.65 percent.

(BusinessDesk)