NZ dollar falls as Greek deal stokes greenback demand

Tuesday 14th July 2015

The New Zealand dollar fell as the prospect of Greece reaching a deal with its creditors soothed investors' concerns about global markets, stoking demand for the greenback.

The kiwi dropped to 66.73 US cents at 5pm in Wellington from 66.93 cents at 8am, and 67.31 cents yesterday. The trade-weighted index declined to 70.68 from 71.05 yesterday.

Stocks across Asia rallied on after an agreement between Greece and Europe's leaders will be taken back to the Mediterranean nation's parliament to ratify austerity measures in return for a bailout package, as early as Wednesday. That stoked investors' appetite for risk-sensitive assets such as equities and eased fears the US Federal Reserve's plans to start raising interest rates this year would be derailed by global market turbulence.

"The US dollar rallied as risk came back to a certain degree, though it's more reflective in the stock markets than currencies," said Stuart Ive, senior dealer foreign exchange at OMF in Wellington. "The kiwi and the Aussie have been sidelined here."

Despite the potential for further political turmoil as Greek Prime Minister, Alexis Tsipras, faces anger at home over the provisional bail-out agreement, traders are turning their focus on Fed chair Janet Yellen's upcoming testimony to the US House of Representatives, Fonterra Cooperative Group's next GlobalDairyTrade auction, and New Zealand inflation figures later this week.

Ive said the second-quarter consumers price index will be keenly watched as an indicator of whether the Reserve Bank will cut the official cash rate more aggressively at a review on Thursday next week, with a 94 percent chance governor Graeme Wheeler will lower the OCR priced in.

New Zealand's two-year swap rate increased to 3 percent at 5pm in Wellington from 2.98 percent yesterday, and the 10-year swap rate advanced to 3.9 percent from 3.86 percent.

The kiwi dropped to 89.87 Australian cents from 90.42 cents yesterday after the National Australia Bank business confidence report improved in June, showing its highest reading since September 2013.

The local currency fell to 4.1427 Chinese yuan from 4.1779 yuan yesterday ahead of China's second-quarter gross domestic product report tomorrow, which is expected to show the world's second biggest economy grew at an annual pace of 6.8 percent, slowing from a 7 percent pace in March.

The kiwi gained to 60.65 euro cents from 60.45 cents yesterday, and slipped to 43.10 British pence from 43.43 pence. It was little changed at 82.41 yen from 82.51 yen yesterday.

BusinessDesk.co.nz

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