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FOREX-New Zealand dollar jumps, euro firms into ECB
December 8, 2016 / 12:18 PM / in a year

FOREX-New Zealand dollar jumps, euro firms into ECB

(Adds yen gain, updates prices)

* Kiwi bolstered by risk appetite, upbeat RBNZ view

* Euro firms ahead of European Central Bank policy statement

* Strong resistance to more euro gains past $1.08

By Patrick Graham

LONDON, Dec 8 (Reuters) - New Zealand’s dollar was the biggest gainer among major currencies on Thursday, rising 0.7 percent after a speech by Reserve Bank Governor Graeme Wheeler added to speculation the bank would raise interest rates next year.

With all eyes fixed on a European Central Bank meeting widely expected to extend its programme of quantitative easing, the euro was around a quarter of a percent higher against the dollar. The yen also gained, prodding the dollar index to a three-week low.

New Zealand has consistently run higher interest rates than its developed world peers since the 2008 financial crisis, and Wheeler confirmed the bank’s most recent guidance that rates were unlikely to go lower than the current 1.75 percent.

But he also pointed to the beginnings of a turn higher in global inflation expectations that might end the ultra-

easy settings in other major economies and relieve upward pressure on the kiwi.

Conversely, that was read as removing a barrier to higher domestic rates next year, which would support the currency.

“Wheeler struck an upbeat tone on inflation and growth and pointed to the global factors that have been keeping the NZD overvalued abating,” analysts from Credit Agricole said in a morning note. “The market increased the chances of a rate hike in 2017 to almost 80 percent.”

By 1200 GMT, the kiwi was up 0.5 percent at $0.7200.

The euro had made steady gains on Wednesday and it rose another 0.2 percent in the European morning, topping $1.08 for the first time in three weeks.

While a stronger greenback has been the consensus since Donald Trump’s election a month ago, some senior bank analysts have begun to question the durability of the rally going into the holiday season.

However, a number of traders and investors said $1.08-$1.09 looked like strong resistance levels to further gains for the single currency.

“I think there is risk for a stronger euro if they deliver a message that is in line with expectations,” said Alessio de Longis, a portfolio manager and macro strategist with Oppenheimer Funds in New York.

“But in our view euro rallies ought to be sold. We are still in our camp of pushing the euro lower into the new year. If we are right on the dollar’s strength next year then it should break parity.” (Editing by Larry King)

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