Thursday, June 12, 2014

New Zealand Raises Rates, Kiwi on four months high

New Zealand’s dollar surged, headed for its biggest daily gain in four months, after the central bank raised interest rates and flagged further increases. The two-year swap rate climbed 11 basis points, or 0.11% point, to 4.13%, the highest since July 2010. New Zealand’s central bank boosted its official cash rate by a quarter-percentage point to 3.25 percent, the third increase this year, and signaled more tightening to come. The RBNZ left its forecast for the 90-day bank bill rate broadly unchanged; suggesting borrowing costs may rise twice more this year.
RBNZ Assistant Governor John McDermott said currency traders are mispricing the nation’s dollar and should be taking more notice of falling commodity prices. The kiwi rallied at least 1 percent versus all of 31 major counterparts as Reserve Bank of New Zealand Governor Graeme Wheeler said it was important to contain inflation expectations. And it appreciated 5.8 percent this year. New Zealand’s currency jumped 1.4 percent to 86.70 U.S. cents, headed for its biggest gain on a closing basis since Feb. 4. The kiwi appreciated to as much as 86.85, the highest level since May 15.

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