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Kiwi climbs over US71c as stocks gain

Wednesday 18th August 2010

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The New Zealand dollar climbed back over 71 US cents as stocks on Wall Street rose amid optimism of more merger and acquisition activity, while investors' fears about the state of Europe's sovereign debt eased.  

Investors' appetite for M&A activity was stoked after BHP Billiton, the world's biggest mining company, made an unsolicited bid for Canada's Potash of Saskatchewan, the world's biggest fertiliser company.

The Dow Jones Industrial Average climbed 1% after Wal-Mart Stores and Home Depot reported better than expected second-quarter earnings.

Across the Atlantic, successful government bond auctions in Spain and Ireland allayed pessimism about the state of Europe's sovereign debt after a weak Italian auction stoked fears last week.  

"The M&A activity has people optimistic and we had good bond auctions in Spain and Ireland - people got overly pessimistic with these auctions," said Imre Speizer, markets strategist at Westpac.

"There's every chance we'll see the kiwi a bit higher before it turns around and has a look at 70 US cents this week."  

The kiwi climbed to 71.21 US cents from 70.94 cents yesterday, and rose to 66.35 on the trade-weighted index of major trading partners' currencies from 66.10. It gained to 60.90 yen from 60.56 yen yesterday, and was little changed at 78.66 Australian cents from 78.62 cents. It increased to 55.30 euro cents from 55.09 cents yesterday, and advanced to 45.73 pence from 45.30 pence.  

Speizer said the currency may trade between 70.80 US cents and 72 cents today as it continues to take its cues from offshore until the next monetary policy statement from the Reserve Bank in two weeks.  

The kiwi held near a three-and-a-half month low against its Australian counterpart after Reserve Bank of Australia Governor Glenn Stevens told a Perth forum there was enough competition in domestic banking and warned against over-regulation.  

US data underpinned investor sentiment with industrial production expanding at twice the expected pace. Germany's Zew measure of sentiment reported a sharp increase in analysts' and investors' current outlook, though their future expectations came in below forecasts.

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