FOREX-Kiwi jumps vs dollar, yen as rate view shifts

Thu Mar 26, 2009 3:01am EDT

* NZ dollar jumps vs dollar, yen as rates seen near bottom

* Dollar edges up vs yen, off previous day's lows vs euro

* Geithner says dollar to remain world's reserve currency

By Masayuki Kitano

TOKYO, March 26 (Reuters) - New Zealand's dollar jumped more than 1 percent against the U.S. dollar and the yen on Thursday as investors searching for yield took the view that interest rates there were at or very near the bottom.

In an otherwise subdued Asian session, the U.S. dollar edged up against the Japanese currency and held steady against the euro, recovering from lows hit after U.S. Treasury Secretary Timothy Geithner said he was open to expanding the use of the International Monetary Fund's special drawing rights.

The kiwi surged to its highest in more than two months at $0.5774 NZD=D4 and touched a four-month peak of 56.42 yen NZDJPY=R as New Zealand government debt yields surged in a sign investors were reining in expectations for lower rates.

"The New Zealand dollar is rising on the macro view that interest rates are edging towards the bottom," said Richar order to lock in at lower rates and leading to a rise in bond yields.

"A lot of guys want to buy the NZ dollar because yields are rising sharply and there are signs of renewed interest in carry trades," said Gerrard Katz, head of North Asia currency trading at Standard Chartered in Hong Kong.

Carry trades involve borrowing in one currency with low interest rates to buy higher-yielding assets in another and were a popular play against the yen before the global financial crisis.

The New Zealand dollar rose 1.25 percent to $0.5745 and 1.68 percent to 56.16 yen.

The Australian dollar fell 1.1 percent to NZ$1.2161 AUDNZD=, hitting a 10-week low and adding to broad strength in the kiwi.

DOLLAR EDGES UP

The dollar rose 0.2 percent from late U.S. trading on Wednesday to 97.71 yen JPY=, after dipping to 96.90 yen in the previous session.

Geithner said he was open to expanding the use of the IMF's special drawing rights, comments investors initially interpreted as an endorsement of China's proposal this week to eventually replace the dollar as the world's reserve currency with SDRs. [ID:nPEK184558]

His comments pushed the dollar lower but it then regained ground after he said the dollar would keep its status as the top reserve currency for a long time. [ID:nN25425979]

Geithner was probably commenting on China's call for expanding use of the IMF's SDRs rather than about the notion that the SDR may eventually replace the dollar as the world's reserve currency, said Masafumi Yamamoto, head of foreign exchange strategy Japan at Royal Bank of Scotland.

"The remarks probably were not made from the standpoint of foreign exchange policy," Yamamoto said, adding Geithner probably did not mean to auropean bank said the reasons behind the flows were unclear, although they might be related to overseas investment by Japanese investors.

With the end of Japan's fiscal year next week, this is a time when special seasonal flows can appear, he said.

The yen has slid against high-yielding currencies in the past few weeks as gains in global stock markets have pointed to an improvement in investors' risk appetite.

Underscoring such sentiment, Asian shares were broadly higher. The rise in regional shares came after U.S. stocks rose on Wednesday as unexpectedly strong housing and durable goods data fuelled hopes the economy is finally on the mend. (Additional reporting by Charlotte Cooper in Tokyo and Eric Burroughs in Hong Kong; Editing by Michael Watson)

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