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NZ dollar hits record high vs. euro after leaders approve Spanish bailout

Monday 23rd July 2012

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The New Zealand dollar rose to record high versus the euro after policymakers finally approved a 100 billion euro bailout for Spain's banking sector.

The New Zealand dollar rose as a high as 65.98 euro cents, the most since the single currency entered circulation in 2002, from 65.74 cents at the close of trading in New York. It traded at 65.80 cents at 8am. The kiwi declined to 79.70 US cents from 79.93 cents.

Eurozone finance ministers met by conference call on Friday to finally approve an agreement to provide aid to Spain. The move did little to ease concern about Europe's woes, with Spanish Prime Minister Mariano Rajoy forecasting a second year of recession and Valencia becoming the first region to seek a rescue from the nation's central government.

"It is the Spanish news which sent the euro tumbling," said Stuart Ive, currency strategist at HiFX. "Certainly it's not good news but I don't think it will lead to a Spanish sovereign bailout."

"The kiwi and the Aussie are still holding up remarkably well," Ive said. Against the US dollar the kiwi is "still in last week's trading range, it's just at the bottom end of it - I think we will continue in this range."

In a sign that investors still see Spain as high risk, Spanish 10-year government bond yields closed the week up 27 basis points at 7.19 percent on Friday.

Officials from the European Central Bank, International Monetary Fund and European Commission will return to Greece this week to decide whether to release more funds from a 130 billion euro rescue package.

There is no significant data set for release in New Zealand today.

The New Zealand dollar was little changed at 76.90 Australian cents at 8am from 76.93 cents at the close of trading in New York. The kiwi was largely unchanged at 51.03 British pence from 51.13 pence. It dropped to 62.50 yen from 62.71 yen. The trade weighted index was little changed on 72.34 from 72.40.

BusinessDesk.co.nz

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