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Sancho Panza

Kiwi Rises To Record As New Zealand Raises Rates

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New Zealand’s dollar advanced to a record on a trade-weighted basis after its central bank raised interest rates and said strength in the currency was due to high prices for the nation’s exports.

The kiwi held this year’s gains against all 16 major peers as Reserve Bank Governor Graeme Wheeler indicated he will tighten policy further this year to damp inflation pressures after today announcing the first rate increase from a major developed economy. New Zealand’s currency was near a six-week high versus Australia’s before the larger economy reports on employment today.

Bloomberg 13/3/14

'“Strength in the currency will not impede the hiking process, which does allow the New Zealand dollar to remain strong over the coming month,” said Sam Tuck, a senior foreign-exchange manager at ANZ Bank New Zealand Ltd. in Auckland. “They are linking the exchange rate to the terms-of-trade boost, this implies that, from the RBNZ perspective, the currency is strengthening for valid reasons.” Terms of trade refers to a nation’s export earnings relative to imports.

The New Zealand dollar rose as high as 85.25 U.S. cents, the strongest level since Oct. 22, before trading at 85.22 as of 9:26 a.m. in Sydney. It bought 87.53 yen and touched 87.95 on March 7, the most since February 2008. The kiwi traded at NZ$1.0553 per Aussie and touched NZ$1.0540 following the RBNZ decision, the strongest level since Jan. 24.

The RBNZ’s trade-weighted index for the kiwi climbed as high as 79.86, the strongest level for data going back to 1985 when the currency was floated.

RBNZ Statement

“It is necessary to raise interest rates toward a level at which they are no longer adding to demand,” Wheeler said in a statement in Wellington after increasing the official cash rate by a quarter percentage point to 2.75 percent. The RBNZ expects to raise the rate by about 2 percentage points over two years, with the pace depending on economic data, Wheeler said.

The two-year swap rate, a fixed payment made to receive floating rates, climbed to 3.99 percent, the most since November 2010.

There’s a risk that a round of mortgage-related fixings by New Zealand households will help spur the swap rate toward 4.15 percent, said Jarrod Kerr, a director of rate strategy in Sydney at Commonwealth Bank of Australia.'

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Very good sign that.

Last country to lower rates is now leading the way out.

I wonder if any admin can assist with this: there are interesting times ahead, and I am using this site as a source of information much more now than I have been in the several years since the crash. Interest rates (and inflation) are my areas of real interest. When I look at the commentary on this site next to the UK base rate chart, it reads:

Here we can see the record low interest rates that we have been experiencing. Cheap credit has fuelled to recent housing boom but credit is only cheap if the interest rates stay low which people are quick to forget about when jumping into a 25 year mortgage.
Long term average interest rates are around 5% and homeowners should expect at least one more interest rate rise before the end of 2007 to counter inflationary pressures

Come on HPC, that hasn't been updated for coming on for 7 years!

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