21 Oct 2013

Prediction market will view NZ dollar as safe haven

7:29 am on 21 October 2013

The temporary solution to the US fiscal crisis has led to a prediction that the market will start to view the New Zealand dollar as more of a safe haven than a risk.

The kiwi hit a five month high against the US last week due to expectations the Federal Reserve will keep up with its monetary stimulus now a debt deal has been struck.

After weeks of acrimonious wrangling, America's politicians last week agreed to end the partial government shutdown and lift the debt ceiling.

But it is only a temporary arrangement - the measure funds the government until January and extends the Treasury's borrowing authority until February.

The New Zealand dollar is about the tenth most traded currency in the world.

ANZ senior manager of foreign exchange Sam Tuck says he doesn't expect that to change significantly after the crisis in the United States.

He says the Australian dollar is moving towards becoming a quasi-reserve currency and more of a safe haven than a financial risk.

Mr Tuck says the perception of the New Zealand dollar is likely to change as it is usually treated in the same manner as the Australian dollar.

He says the US situation may increase the New Zealand dollar's trading in the long-term, but it is likely the Asian countries will overshadow any increase in the New Zealand dollar in terms of its rating in the G10.