Interest Rate Speculation Improves Kiwi

The major contributing factor to the strengthening of the Kiwi against the US Dollar and other major currencies last week came from the New Zealand Reserve Bank.

 
 

GBP NZD 29.07

The New Zealand Dollar began trading at around 1.929 to the British Pound last Monday and around 1.262 against the US Dollar. The Kiwi strengthened against both currencies to end the week at 1.903 and 1.239 to the US Dollar. The Kiwi opened in the same region compared to the previous week on Monday morning at 1.905 to the Pound and 1.238 to the US Dollar.

The major contributing factor to the strengthening of the Kiwi against the US Dollar and other major currencies last week came from the New Zealand Reserve Bank. It has signalled that they will be increasing interest rates in the coming months. When interest rates increase, or look likely to increase, investors move more money into the local cash market. By doing this they earn higher returns because of the higher interest rate. This is called the “carry trade”. By selling their currency and purchasing the local currency to facilitate this carry trade, this drives the local currency value up – in this instance, the NZD.

In the U.K, we saw GDP figures released which were up from the previous quarter, but this was as expected by the markets. With the figures being as expected, the general consensus is that the Bank of England will keep interest rates at their current all-time low. The announcement of the actual number occurs on Thursday.

Overall, it was a good week for the Kiwi last week. Looking at the week ahead, we have very important data being released on Wednesday when the Federal Reserve will be releasing their Gross Domestic Product figures for the last three months.

Composed by David Monteiro

Exchange rates as of 08:00, 30 July 2013

GBP / NZD: 1.9178

EUR / NZD : 1.6585

USD / NZD : 1.2511

AUD / NZD : 1.1335

Note: The above exchange rates are based on “interbank” rates.  If you want to transfer money to New Zealand then please register/login or call us for a live dealing rate. Make use of a Rate Notifier to send you alerts when the New Zealand exchange rate reaches levels you are looking for.

 
 

 
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