NZ dollar holds above 80 US cents on optimism Europe will tackle debt woes

Monday 17th October 2011

The New Zealand dollar held above 80 U.S. cents, having soared late on Friday in the US, on optimism Europe’s leaders will manage to tackle debt problems in the region that have threatened to derail global growth.

The kiwi dollar recently traded at 80.07 US cents, down from 80.24 cents at 8am and up from 79.31 cents on Friday. The trade-weighted index was at 70.09, down from 70.14 this morning and up from 69.63 on Friday.

European finance ministers including UK chancellor George Osborne and French finance minister Francois Baroin have indicated optimism for progress when the European Council meets on Oct. 23.

Group of 20 finance chiefs who met last weekend said they’re ready to work together to help avert any defaults in Europe.

“Global financial market sentiment has improved over the last week, as participants become more confident that progress is being made on resolving the European debt crisis,” said ASB chief economist Nick Tuffley. The kiwi is likely to be driven by offshore developments this week, in the absence of local data, he said.

Five economists and market strategists surveyed by BusinessDesk said the kiwi may trade in a range between 79.20 US cents and 81.50 cents this week. It may trade between 76.80 Australian cents and 78.30 cents.

The New Zealand dollar bought 77.82 Australian cents, up from 77.62 cents this morning and 77.87 cents on Friday. The kiwi bought 61.86 yen, up from 61.83 yen earlier and 61 yen on Friday.

The kiwi traded at 57.88 euro cents from 57.81 at 8am this morning and from 57.65 on Friday and was at 50.73 British pence, little changed from this morning and up from 50.41 pence on Friday.

The kiwi didn’t move much after figures today showed the nation’s service industry expanded for an eighth month in September, with the pace slipping from August, with growth led by new orders.

The BNZ-Business New Zealand performance of service index (PSI) fell 0.6 points from August to 53.2 on a scale where 50 marks the divide between expansion and contraction.

Migration figures for September and the Labour Cost Index for the June quarter are due on Friday.

BusinessDesk.co.nz

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