New Zealand Currency Gains Most in Month Versus U.S. Dollar

By Candice Zachariahs

Aug. 14 (Bloomberg) -- The New Zealand dollar gained the most in four weeks against the U.S. currency and four months versus the Japanese yen after a technical indicator showed the currency's recent decline may have been overdone.

The kiwi, as the currency is called, has dropped 7.7 percent against the dollar and 4.8 percent against the yen over the past month. The local dollar slid after the Reserve Bank of New Zealand reduced its benchmark rate to 8 percent on July 24 and said further cuts were likely.

``It's a signal that a low is in and that the market should reverse after trending, in this case, lower for the past few weeks,'' said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. ``The New Zealand dollar looks like it's potentially going to bounce quite hard.''

New Zealand's currency strengthened 1 percent to 70.27 U.S. cents at 8:43 a.m. in Wellington, from 69.56 cents in late Asian trading yesterday. It gained 1.6 percent to 77.01 yen, from 75.8 yesterday.

The kiwi's 14-day relative strength index against the dollar fell to 26.6. A reading below 30 suggests a change in price direction is imminent.

New Zealand's dollar was the second-worst performer against the U.S. dollar among the 16 most-traded currencies over the past month, after the Australian currency. Investors have increased bets that the Reserve Bank will reduce the benchmark rate by 1.49 percentage points over the next 12 months, according to a Credit Suisse Group index based on overnight swaps trading yesterday.

To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net