The New Zealand dollar touched a fresh six-and-a-half-year high against the yen as investors bet on the prospects for a global economy recovery.
The kiwi touched 89.91 yen overnight, the highest level since November 2007, and was trading at 89.67 yen at 8am on Wednesday from 89.54 yen at 5pm a day earlier. The local currency touched a two-and-a-half year high of 87.01 US cents overnight before slipping to 86.47 US cents at 8am from 86.72 cents on Tuesday.
Overseas equities advanced overnight, pushing the Standard & Poor’s 500 Index to a record high, as the latest US manufacturing data showed that the US economic recovery remained on track.
Improved prospects for the world’s largest economy buoyed investor sentiment about a global economic recovery and damped demand for safe haven investments such as the yen.
“Yen is a safe haven currency so when you have risk aversion it does well and when you have risk seeking it does badly,” said Imre Speizer, senior market strategist at Westpac. “Yen has underperformed as equity markets have gone up. It’s not so much a Japanese fundamental story – it’s a global recovery story, and the US particularly is recovering very, very slowly but going steadily in the right direction.”
Mr Speizer said the economic recovery trend was set to continue for the next couple of years.
In the US on Tuesday, the Institute for Supply Management’s index increased in March, a sign that the effects of the harsher-than-usual American winter are beginning to wear off. Of the 18 manufacturing industries, 14 reported growth, according to the report.
In New Zealand traders will be eyeing the March ANZ Commodity Price Index.
Prices dropped at Wednesday morning’s Fonterra Cooperative Group GlobalDairyTrade auction as volumes increased.
The New Zealand dollar was little changed at 93.53 Australian cents from 93.61 cents after the Reserve Bank of Australia kept its benchmark interest rate at 2.5 per cent as expected. Australia has data on first quarter job vacancies and building approvals for February scheduled for release.
The kiwi slipped to 62.69 euro cents from 62.95 cents and was little changed at 52 British pence from 52.03. The trade-weighted index weakened to 80.78 from 80.94.