New Zealand’s currency gained to the strongest level since April against the yen and reached an almost three-week high versus the U.S. dollar after the Reserve Bank of New Zealand left interest rates unchanged and said market sentiment has improved.
The kiwi, as New Zealand’s dollar is nicknamed, strengthened after bank Governor Graeme Wheeler said inflation is expected to accelerate. The Australian dollar reached the highest in two months versus the yen as swaps traders reduced bets that Reserve Bank of Australia Governor Glenn Stevens will cut the nation’s benchmark rate next month. The currencies reversed gains versus the dollar as risk appetite ebbed.
“The RBNZ didn’t change anything, and may have disappointed some dovish traders in the process,” Neal Gilbert, a market strategist at GFT Markets, wrote yesterday in a note to clients. “Since they made no dovish insinuations at all, the New Zealand dollar has rallied in response.”
The kiwi climbed to 66.19 yen yesterday in New York, its highest level since April 30, before trading at 65.69 yen, up 0.3 percent. It fell 0.3 percent to 81.80 U.S. cents after earlier gaining as much as 0.5 percent to 82.43 cents, the strongest since Oct. 5.
The Aussie dollar reached 83.48 yen, the highest since Aug. 21, before trading at 83.08 yen, up 0.5 percent. It rose as much as 0.4 percent to $1.0397 before ending the day little changed at $1.0347.
The RBNZ expects annual inflation to head back to the middle of its 1 percent to 3 percent target range from 0.8 percent in the third quarter, Wheeler said in a statement. Improved market sentiment suggests that risks to the global outlook are “more balanced,” he said.
Wheeler left the official cash rate unchanged at 2.5 percent, the highest among major developed economies after Australia’s 3.25 percent. The RBA meets Nov. 5.
New Zealand’s dollar has strengthened 3.7 percent this year, the biggest increase among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The Aussie has fallen 0.4 percent, and the greenback is down 1.8 percent.
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