NZ dollar rises as muted US inflation keep rate hike chances low; Greek aid talks drag

Friday 19th March 2010

The kiwi dollar gained after figures showed the US economic expansion is continuing at a mild pace with little inflation, ensuring interest rates in the world’s biggest economy can remain low and stoking the appeal of higher-yielding currencies.

US consumer prices didn’t budge last month, the first time in a year they have been unchanged, according to Labor Department figures showed today in Washington. Other figures showed first-time jobless applications fell 5,000 to 457,000 in the week ended March 13, while the Conference Board’s index of leading indicators rose for the 11th straight month in February. The data comes after the Federal Reserve reiterated that it would keep interest rates near zero for an extended period. Meantime, Greece has threatened to turn to the International Monetary Fund for aid as talks on a rescue by European nations flounder.

“Sentiment is upwards for the kiwi dollar,” said Imre Speizer, senior markets strategist at Westpac Banking Corp. “I can see the kiwi dollar in the next week, going to around 73 cents.”

The currency may not move much today as traders await the so-called quadruple witching hour on Friday in the US, when contracts for stock index futures, stock index options, stock options and single stock futures expire. “It creates a lot of volatility in the market, although it’s hard to say whether it will go up or down,” he said.

The New Zealand dollar recently traded at 71.48 US cents, from 71.26 cents late yesterday. It has held above 71 cents this week since breaking through what was a key level on its fifth attempt since February. Speizer expects the kiwi to trade in a range of 71.20 cents to 71.80 cents today.

The kiwi rose to 52.48 against the euro from 52.05 yesterday as Greece tries to up the ante on the EU, with Prime Minister George Papandreou setting a one-week deadline for the EU to create a financial aid mechanism or the country may turn to the IMF.

Speizer said Greece’s current debt crisis has been a “flip-flop story”, with “lots of comments and denial”.

The New Zealand dollar rose against the yen for the second day in a row, to 64.44 yen from 64.23 yesterday. The Bank of Japan announced on Wednesday it would keep interest rates at a record low and double the size of its liquidity programme for banks.

The kiwi rose to 77.53 Australian cents from 77.29 cents and climbed to 46.85 British pence from 46.56 pence.

Businesswire.co.nz

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