NZD/USD advanced on RBNZ Graeme Wheeler comments

New Zealand dollar gained ground against its US peer on Thursday, following the comments made by Reserve Bank of New Zealand Governor Wheeler earlier today.

NZD/USD reached a session high at 0.8148 at 1:00 GMT, after which consolidation followed at 0.8130, gaining 0.56% for the day. Support was likely to be received at September 9th low, 0.7962, while resistance was to be met at August 19th high, 0.8162.

Reserve Bank of New Zealand decided to leave its benchmark interest rate unchanged at the record low level of 2.50% in line with expectations.

“With the inflation pressures that have the potential to build up, given the capacity constraints in the economy, we will need to raise interest rates,” Reserve Bank of New Zealand Governor Graeme Wheeler said in Wellington earlier today, cited by Bloomberg. “Exactly when that will start to trigger will be determined by many factors. At this point we don’t expect that to start this year.”

New Zealand may become one of the first developed countries to consider raising borrowing costs, because an overheated housing market and accelerating growth begin stoking price pressures. RBNZ Governor Wheeler is betting that new limits on high-risk mortgages will ease demand for property and give him opportunity to maintain interest rates unchanged for as long as possible in order to avoid a boosted demand for the kiwi dollar, the media also imparted.

According to a survey by Bloomberg last week, 13 out of 15 economists expected a raise in interest rates by March 31st. “The extent and timing of the rise in policy rates will depend largely on the degree to which the momentum in the housing market and construction sector spills over into broader demand and inflation pressures,” RBNZ Governor said. The central bank revised up its economic growth forecast for the year through March 2014 to 3.2% from 3% previously, stressing on construction sector and a boost to spending from rising house prices.

Meanwhile, the kiwi was expanding against the Australian dollar, as AUD/NZD cross plunged 1.38% on a daily basis to trade at 1.1388 at 6:32 GMT.