Improving global economic sentiment continues to raise demand for kiwi assets, boosting the NZ currency vs the pound

The kiwi advanced over three and a half cents (1.6%) against the pound yesterday as investors showed renewed enthusiasm for risky assets.

  • Rising commodity-prices and stronger-than-expected corporate earnings in the US have contributed to continued demand for higher-yielding currencies.
  • In addition, investors are now pricing in that New Zealand’s central bank is likely to drop its monetary- easing bias at its meeting next week as economic data point to improvement.
  • Although there has been speculation that the RBNZ has expressed concern that the strength of the kiwi is frustrating economic recovery, strong data has investors questioning whether the central bank can keep interest rates on hold until the middle of next year.
  • In trading this morning, the New Zealand dollar has capped its gains, with the price currently hovering just above 2.17.