Insurance pay-outs strengthen the New Zealand Dollar

Home » Foreign Currency News » Insurance pay-outs strengthen the New Zealand Dollar

There was no clarity on the currency markets yesterday as most currencies traded within ranges. Sterling fell early on against the US Dollar only to recover in the afternoon while against the Euro, it was up in the morning and fell in the afternoon suggesting that investors are unsure of recent data and survey releases.

The stronger data and surveys from the US in the past week have been counterbalanced by the developing spat over the US Budget and ongoing QE2. Democrats and Republicans are both proposing relatively modest spending cuts (compared with the size of the deficit). The US Dollar has therefore been caught in the crossfire, testing the 14-month high at £/$ 1.64 against Sterling.

The NZ Dollar and Australian Dollar have both performed well this week amid signs that the Asian economies are still on track for solid growth, offsetting concerns of slowdown in light of the Japan earthquake last month. The Kiwi Dollar in particular has had the upper hang against the US Dollar, Australian Dollar, Euro and Sterling, supported by billions of dollars worth of reinsurance payments into the country after the Christchurch earthquake in February.

Whether the NZ Dollar can maintain this is finely balanced following yesterday's manufacturing data which showed the country is in decline after the earthquake. Market commentaries have described the Kiwi Dollar in a position of strength with no obvious indicators to the contrary. This is vast contrast to the view of the RBNZ, who cut interest rates by 0.5% in March to stimulate the economy. 

Today's all about the US. CPI inflation figures for March could see the headline rate rise further to 2.6% from 2.1% with the Empire manufacturing survey for April likely to record a small pull back in activity, but nothing serious.