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Kiwi holds above US71c as Wall Street earnings season begins

Tuesday 13th July 2010

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The New Zealand dollar held above 71 US cents as Wall Street’s second-quarter earnings kicked off with aluminium manufacturer Alcoa Inc. beating expectations.

Alcoa posted net earnings of US$136 million, or 13 cents a share, in the three months through June, beating the forecast 11 cents a share in what’s considered the bellwether for the Standard & Poor’s 500 reporting season.

Stocks on Wall Street edged up, with the S&P 500 gaining 0.1%, before the Alcoa result was announced. The company reports will hold the attention of investors, and likely take the sheen of local data out this week, including housing and consumer spending tomorrow, manufacturing on Thursday, and inflation on Friday.  

“For the time being, things are more or less in a holding pattern” with the US earnings season just beginning, said Khoon Goh, senior markets economist at ANZ New Zealand.

“This week’s local data flow will hold the market’s attention for a second, but once it’s been digested, it’s back to offshore events.”

 The kiwi climbed to 71.08 US cents from 70.88 cents yesterday, and gained to 67.60 on the trade-weighted index of major trading partners’ currencies from 67.52. It edged up to 62.98 yen from 62.85 yen yesterday, and was little changed at 81.16 Australian cents from 81.10 cents. It traded at 56.41 euro cents from 56.39 cents yesterday, and inched down to 47.26 pence from 47.30 pence.

Goh said the currency may trade between 70.65 US cents and 71.55 cents today, with the National Australia Bank business confidence survey the main event in the region. Strong Australian employment data helped underpin support for the kiwi last week, and Goh said the market was ignoring the divergence between the trans-Tasman neighbours’ recent data, with the cross-rate holding between 81 Australian cents and 82 cents.

Real Estate Institute data out tomorrow is expected to show the housing market has come off the boil, with subdued sales volumes last month. Retail spending in May probably picked up as people start to prepare for pending tax cuts and looming GST hikes in October.

S&P 500 earnings will continue with chip-maker Intel Corp. reporting on Tuesday in the US, while search engine Google Inc. and JP Morgan & Co. report on Thursday.

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