16 Jun 2014

Dollar up on rising interest rates

5:55 pm on 16 June 2014

The New Zealand dollar mostly rose on Monday against the currencies of the country's major trading partners.

Bank of New Zealand foreign exchange strategist Raiko Shareef said New Zealand's relatively high interest rates continued to underpin the currency.

"The move higher is two things, one being related to last week's interest rate rise from the Reserve Bank. I think that underlined New Zealand's appeal, the higher interest rates, for an international investor," he said.

"Combined with low volatility in global markets, that makes the carry trade quite a compelling strategy for a global asset allocator.

"The second is a technical story, where the 87 level is quite key and New Zealand dollar bulls are looking to break that level to see if they can push the currency even higher."

Just after 5pm, the New Zealand dollar was buying: 86.84 US cents, 92.27 Australian cents, 51.12 pence, 0.641 euro, 88.34 yen and 5.4 renminbi.

Shares up

New Zealand shares also rose on Monday, the benchmark Top 50 Index gaining 8 points to 5179.

Forsyth Barr investment adviser Damian Kearns said investors were being distracted by the rush of floats, such as Hirepool's plans to raise up to $262 million from its share sale.

Hirepool plans to sell up to $120.1 million new shares to raise $135 million, while existing shareholders plan to sell up to $83.5 million shares.

"A lot of people are preparing their portfolios for the large increase in new issues expected over the next few months," Mr Kearns said.

"People are also reasonably cautious about the valuations of some companies, especially ahead of reporting season, and are looking to increase their cash weighting and perhaps participate in some of the new issues."

Current owner Next Capital will own at least 20 percent of Hirepool after the share sale.

Fletcher Building shares fell 4 cents to $8.93, while Xero shares climbed 16 cents to $29.31