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90 seconds at 9 am: NZ$ spikes to just below post-float high on TWI basis after euro slides and markets interpret RBNZ MPS as hawkish and future OCR cuts less likely
Here's my summary of the key news overnight in 90 seconds at 9 am, including news the New Zealand dollar has spiked over the last day to one year high of 74.4 on a Trade Weighted Index (TWI) basis. It is now just 1% below its post-float high of 75.19.
It has risen sharply against both the US dollar and euro since the Reserve Bank's December Quarter Monetary Policy statement released at 9 am yesterday. The MPS and Reserve Bank Governor Graeme Wheeler's comments were interpreted as hawkish, meaning market expectations of future interest rate cuts were reduced.
Higher interest rates in New Zealand relative to previous expectations and interest rates in other countries make the New Zealand dollar relatively more attractive.
The New Zealand dollar rose to as high as 83.5 USc overnight and was 83.1 USc in morning trade, having risen more than a cent in the last day. Wheeler's only fleeting comments about the effects of the high New Zealand dollar on the export sector and his repeated statements about not intervening helped bolster the currency.
The New Zealand dollar also spiked against the euro overnight from just under 63 euro cents to as high as 64.3 euro cents.
This followed comments from the European Central Bank overnight, which held its official rate at 0.75% and warned of a further slowing of economic growth and inflationary pressures in the Euro-zone region, opening up the prospect of further interest rate cuts on the continent. This, again, made the New Zealand dollar relatively more attractive.
US stocks were slightly higher overnight with most of the focus on the fiscal cliff stalemate and the comments from the ECB. See more here from Bloomberg on the bearish outlook for Europe.
Video due shortly. We've had a few technical issues this morning.