New Zealand Dollar Advances on US Dollar, Euro after SNB Decision

The New Zealand Dollar strengthened during the Australasian session, advancing to an over six-week high against the US Dollar and achieving record levels against the Euro in the wake of yesterday’s Swiss National Bank announcement. To the total surprise of economists, investors and the currency market, the SNB opted to end its over 3 year cap with the Euro despite previously stressing its determination to keep the 1.20 peg in place at any cost. As the move was such a shock, the markets went into freefall. While the Franc surged across the board, the Euro can under intense selling pressure and collapsed to multi-year lows against many of its rivals.

However, while some investors sought out the safe-haven benefits of assets like the US Dollar and commodities like gold, others went on the hunt for higher yields. As New Zealand has the highest interest rate of the developed nations, the New Zealand Dollar’s appeal increased and the currency climbed. According to forex strategist Kathy Lien; ‘When the Swiss National Bank brought interest rates deeper into negative territory, investors were forced to look for alternative safe havens. This resulted in money pouring into Australia and New Zealand, two countries still offering an attractive yield. One of the biggest winners today was the New Zealand Dollar, which rose more than 1%. Like the Fed, New Zealand is one of the few central banks still talking about raising interest rates.’

The ‘Kiwi’s uptrend was stymied however as commodity prices came under pressure and domestic data printed disappointingly. The New Zealand Dollar lost over 0.3% against the Australian Dollar, 0.6% against the Pound and 0.6% against the US Dollar. Chinese data could have a notable impact on New Zealand Dollar trading next week, as could New Zealand’s consumer price data, Performance of Manufacturing Index and consumer confidence figures.