The New Zealand dollar rose back above 65 US cents on speculation the People’s Bank of China is prepared to intervene in currency markets to support the yuan. 

The kiwi traded at 65.16 US cents as at 8am in Wellington, from 65.09 cents on Friday in New York and up from 64.79 cents in Asia last week. The trade-weighted index was at 71.59 from 71.48 last week. 

The New Zealand and Australian dollars turned around earlier losses late last week on speculation China’s central bank intervened when the yuan weakened to seven to the US dollar.

On Friday, PBoC deputy governor Pan Gongsheng said the central bank will use macro-prudential measures to maintain stable expectations in foreign exchange markets. Reuters reported that China will use its currency reserves to prevent the yuan breaking through the 7 yuan per dollar level, citing unnamed sources. The yuan recently traded at 6.9425 per US dollar. The kiwi rose to 4.5237 yuan from 4.5189 yuan last week. 

“Traders suspected the PBoC then entered the market supporting the yuan which saw a turnaround in CNY, later followed by the NZD and AUD,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “Call it a ‘win’ for the PBoC on the day, but expect many more speculative attacks over coming months, which could easily see the episode repeated for NZD and AUD.”

The greenback was weaker on Friday after data showed the US economy grew at a 3.5 percent annualised rate in the September quarter. That was more than expected but inflated by an inventory build-up. Stocks on Wall Street fell on Friday after weaker than expected earnings from Google and Amazon. 

No local data is scheduled for today, although Reserve Bank governor Adrian Orr will deliver a speech to Transparency International at 5.30pm on transparency, accountability and integrity in New Zealand’s financial sector. 

The kiwi traded at 91.79 Australian cents, from 91.87 cents last week, and was at 72.86 yen from 72.84 yen. The local currency edged up to 57.16 euro cents from 57.06 cents last week and 50.83 British pence from 50.74 pence. 

Leave a comment