NZ dollar posts gains on rise and fall of European governments

Wednesday 9th November 2011

The New Zealand dollar was higher in morning trading after Italian Prime Minister Silvio Berlusconi agreed to step down and as investors waited for data from China.

The kiwi was at 79.68 US cents at 8am, up from 79.37 US cents at 5pm yesterday. It had traded as high as 79.65 cents in overnight trading.

As the New Zealand market geared up there was speculation a new Greek prime minister was about to be named while Berlusconi agreed to step down after the Italian budget is approved.

Stock markets erased loses and moved into positive territory after Berlusconi won a crunch parliamentary vote on budget policy because the centre-left opposition abstained. Still, he secured only 308 votes in the 630-seat chamber of deputies, indicating he no longer had an absolute majority, Reuters reported.

Italy’s 10-year bond yield rose 11 basis points to 6.77 percent, the highest since the euro was formed and the difference in yield to similar-maturity German securities widened to a record 497 basis points, Bloomberg reported.

"It's all happening in Europe and the Asian markets won't go too far unless there are some surprises in the Chinese data today," said Tim Kelleher, head of institutional FX sales at ASB.

Currencies "have actually done very little" on the developments overnight in Europe, he said. "They've handled all of this nicely and equities are mixed."

The new Greek government is likely be headed by former European Central Bank deputy Lucas Papademos after the two major political parties agreed earlier this week to form a coalition government to drive through austerity measures to meet the terms of the European Union’s rescue package.

The monthly dump of Chinese data, including retail sales, industrial production and consumer prices, will be a focus this afternoon. The consumer price index is likely to be the most watched.

The kiwi was little changed at 76.85 Australian cents from 76.80 cents at 5pm yesterday. It was at 57.60 euro cents 57.69 cents, and was 49.44 British pence from 49.47 pence yesterday.

The kiwi was little changed at 61.94 yen from 61.92 yen at 5pm yesterday and the trade-weighted index rose to 69.57 from 69.51.

(BusinessDesk)

BusinessDesk.co.nz

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