Having fallen after last week’s very soft CPI figures, the New Zealand Dollar has staged a comeback; not just against a generally weak US Dollar but also against its Aussie cousin. NZD/USD is up more than a full cent from a low yesterday morning of 0.7285 to 0.7395 whilst the AUDNZD cross (which on Monday hit a 7-week high of 110.70) is down at 1.0945.
After a boost from overseas trade figures on Tuesday, the latest news to help the NZD is an update from credit ratings agency Standard and Poors, which reaffirmed its existing high-level sovereign rating for New Zealand, which is AA when borrowing in foreign currency, and AA+ in local currency. S&P said, "The economy is wealthy and resilient, reflecting decades of structural reforms” and that it had incorporated the new Government's ‘more expansionary’ plans into its forecasts, which now have New Zealand growing at an average rate of 2.8 per cent each year over the next three years. "Our ratings reflect solid fiscal performance and our expectation that higher government spending will not materially weaken the country's fiscal profile," S&P said. "New spending measures, including more generous welfare, education, and housing policies, are partly funded through the cancellation of the previous Government's proposed personal income tax cuts… As such, we do not expect the measures to materially affect the Government's fiscal position”
Unsurprisingly, NZ Finance Minister Grant Robertson welcomed the S&P statement. "This decision effectively gives a tick to the policy agenda outlined in the Government's Budget policy statement in December, which confirmed our commitment to the budget responsibility rules, together with the fiscal forecasts presented in the half year economic and fiscal update." The New Zealand Dollar opens this morning in Europe at USD0.7380 and GBP/NZD1.9215.