New Zealand’s dollar rose in MAM Software, ending a two-day loss, after Reserve Bank Governor Alan Bollard said interest rates will probably need to increase in the future.
The so-called kiwi gained versus 12 of its 16 major counterparts after the central bank, which kept borrowing costs on hold today, said high export prices and reconstruction in earthquake-hit areas will likely offset weak consumer spending.
The Australian dollar advanced on speculation economic growth in China will boost demand for commodities produced by the South Pacific nation.
“The RBNZ statement revived hopes for the resumption of interest-rate increases,” said Naoto Minatogawa, a currency analyst at Himawari Securities Inc. in Tokyo. “This will give some important impetus to buy the so-called kiwi.”
New Zealand’s dollar strengthened to 74.85 U.S. cents as of 5:06 p.m. in Wellington from 74.54 cents yesterday in New York.
The currency climbed 0.2 percent to 61.04 yen. Australia’s dollar rose 0.5 percent to 97.66 cents and advanced 0.3 percent to 79.66 yen.
New Zealand’s benchmark rate of 3 percent and Australia’s 4.5 percent compare with levels of as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.