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Kiwi falls as upbeat US data stokes appetite for greenback

Friday 1st October 2010

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The New Zealand dollar fell after upbeat US data soothed concerns about further quantitative easing by the Federal Reserve and stoked investors’ appetite for the greenback.

Investors were more optimistic after estimates of America’s second-quarter economic growth were revised up, while manufacturing data confirmed activity in the Midwest is strengthening. Stocks on Wall Street recorded their biggest monthly gain in 10 years, with the Standard & Poor’s 500 Index rising 8.6%.  

“A pretty ripe set of US data saw the greenback claw back its recent losses and knock the major currencies off their highs,” said Mike Jones, strategist at Bank of New Zealand.

“People are still cautious about New Zealand and are cautious about taking the kiwi higher.”

The kiwi fell to 73.46 US cents from 73.70 cents and dropped to 66.15 on the trade-weighted index of major trading partners’ currencies from 66.32. It was little changed at 61.31 yen from 61.37 yen yesterday, and slipped to 76.01 Australian cents from 76.10 cents. It declined to 53.91 euro cents from 54.22 cents yesterday, and gained to 46.76 pence from 46.54 pence.

Jones said the currency may trade between 73 US cents and 74 cents today with American and Chinese manufacturing data likely to keep investors upbeat. The National Bank Business Outlook wasn’t as bad as it could’ve been and showed a slow economic recovery, he said.

“The TWI’s trending lower as the kiwi economy underperforms,” he said.

Concerns about Europe’s sovereign debt eased after the European Central Bank’s six-day funding tender showed the region’s lenders aren’t as reliant on the central bank as earlier feared.

They had earlier flared up after Moody’s Investors’ Service cut Spain’s credit rating to Aa1 from Aaa, while Ireland’s government announced it faces a blow-out in this year’s fiscal deficit to 32% of gross domestic product after it bails out three lenders to the tune of 34 billion euros.

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