Kiwi climbs above 73 USc following euro higher on EU outlook optimism

The New Zealand dollar climbed above 73 US cents for the first time in almost four months, following the euro higher as economists grow more optimistic about the outlook for the European Union.

The kiwi rose to 73.02 US cents as at 8am in Wellington from 72.66 cents yesterday. The trade-weighted index advanced to 75.13 from 74.85.

The euro gained 0.7 percent to US$1.2271 while US markets were closed for the Martin Luther King Jr public holiday, with speculative investors building record long positions in the shared currency, meaning they expect it to appreciate, according to the latest Commodity Futures Trading Commission data, while economists surveyed by Bloomberg upgraded their 2018 outlook for growth in the eurozone. The euro was also boosted by comments from European Central Bank governing council member Ardo Hansson that the monetary authority should be able to stop its asset purchase programme without any problems in September and he played down the inflationary threat of a stronger currency.

"The main action was in currencies with the EUR/USD retaining its positive tone as the data pulse improves, the ECB tones down its concern of the currency's impact on inflation, and political negotiations to form a government appear to be progressing in Germany," ANZ Bank New Zealand rural economist Con Williams said in a note.

"A strong global growth picture feeding into commodity prices, a weak USD pumping up emerging market purchasing power (read RMB appreciation), seasonality, and the unwind of short positions all seem to be combining in various measures to give the NZD a new year boost," he said.

Traders will be watching the New Zealand Institute of Economic Research's quarterly survey of business opinion out today, which will probably show weaker business confidence following on from the formation of a Labour-led government, and December retail spending data on credit and debit cards.

Bank of New Zealand currency strategist Jason Wong said the kiwi dollar is already over-bought, pointing to a reading of 72.17 on the relative strength index. Technical analysts view of a move above 70 on the RSI as a sign an asset is poised to fall.

The local currency traded at 59.50 euro cents from 59.55 cents yesterday and was almost unchanged at 52.89 British pence from 52.88 pence. It was at 91.55 Australian cents from 91.49 cents yesterday, and rose to 4.6988 Chinese yuan from 4.6666 yuan. The kiwi edged up to 80.58 yen from 80.45 yen yesterday.

(BusinessDesk)