Kiwi leads rally of commodity exporters on Draghi stimulus tone

by NZ Adviser23 Oct 2015
(Bloomberg) The New Zealand dollar, South African rand and Mexican peso all surged more than 2 percent against the euro after the European Central Bank president said policy makers will investigate fresh stimulus measures in December to boost the region’s economy.

The kiwi climbed the most in seven years against the common currency.

“The ECB is likely to ease more aggressively than the market thought -- traders have been very enthused by that, and that’s why we’re seeing stocks, commodities and some high- yielding currencies rally,” said Matt Weller, an analyst at Gain Capital Holdings Inc.’s Forex.com unit in Grand Rapids, Michigan. “The biggest moves have been in the currencies that have beaten down the most,” including the kiwi, he said.

Investors showed demand for risker assets as U.S. equities strengthened more than 1 percent, while crude oil and copper gained 0.9 percent and 1.3 percent, respectively.

Raw-material exporters have seen a currency rebound in the past month on speculation that the Federal Reserve isn’t going to raise interest rates any time soon. Central banks in Europe and Japan are carrying out unprecedented monetary easing, which tends to depress their currencies.

“The degree of monetary-policy accommodation will need to be reviewed at our December meeting when new macroeconomic projections will be available,” Draghi said after the ECB’s meeting in Malta.

The kiwi rallied as much 3.1 percent against the euro, reaching the biggest gain since October 2008, before trading at 1.6428 as of 11:26 a.m. in New York. The New Zealand dollar was also bolstered by comments from the nation’s finance minister, Bill English, who said the foreign-exchange rate has adjusted quite considerably.

The Mexican peso rose 2.2 percent to 18.4667 per euro, while South Africa’s rand climbed 2.2 percent to 15.0023 against the common currency.

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