The New Zealand dollar rose as investors returned to more risk sensitive assets as fears over an escalation of tension in Ukraine proved unfounded and markets were relatively stable after China widened the trading band of its currency.
The kiwi increased to 85.67 US cents at 8am in Wellington from 85.32 cents at 5pm on Monday. The trade-weighted index gained to 79.92 from 79.70.
Risk sensitive assets such as equities and the New Zealand dollar advanced after investors were becalmed by the moderate diplomatic reaction following Crimea’s vote to join Moscow over the weekend as the US and European Union imposed sanctions.
The People’s Bank of China doubled the yuan’s trading band, seen as a move to support the world’s second-biggest economy amid slowing exports.
“Markets breathed a collective sigh of relief last night as fears of Crimea and China volatility failed to materialise,” ANZ said in a note. “Safe havens Japanese yen and Swiss franc depreciated, while the risk sensitive New Zealand dollar and Australian dollar appreciated.
The New Zealand dollar advanced to 87.16 yen from 86.62 yen.
The kiwi slipped to 94.27 Australian cents from 94.43 cents after Westpac Banking Corp said it no longer expects Australia’s central bank to cut rates this year.
The local currency gained to 61.55 euro cents from 61.35 cents and increased to 51.50 British pence from 51.28 pence.