NZ dollar gains as Greek austerity vote boosts demand

Tuesday 14th February 2012

The New Zealand dollar rose after the Greek Parliament approved a series of budget cuts, increasing investor optimism and boosting their demand for risk-sensitive assets.

The New Zealand dollar gained to 83.53 US cents just before 8.30am from 83.27 cents yesterday at 5pm. It advanced to 63.27 euro cents from 62.87 cents.

The New Zealand dollar was the biggest gainer against the greenback among the 16 major currencies tracked by Bloomberg. Investors sought bigger returns after Greek Prime Minister Lucas Papademos won parliament’s approval for the austerity measures need to receive a second aid package. The deal includes more than a 20 percent reduction in the minimum wage and cutting one in five civil service jobs. Euro-zone finance ministers will meet on Feb. 15 to decide whether to sign off on the package.

“The kiwi does look like it is still trying to edge higher with some talk of people looking for higher yields,” said Stuart Ive, currency strategists at HiFX. “We may see high gains before any fall backs – we are at least aiming for that 84.07 US cents high.”

Investor sentiment was bolstered by US President Barack Obama outlining his election year budget to cut mounting debt in the world’s biggest economy, with the Standard & Poor’s 500 Index gaining 0.8 percent to 1352.66.

Obama's plan would involve "very difficult" cuts to government spending and programs, but still boost debt by US$6.7 trillion over the next decade. The budget forecast the nation’s economy will expand 2.7 percent this year that compares with the 2.2 percent forecast according to the median of 79 estimates in a survey of economists by Bloomberg.

New Zealand’s January Food Price Index and local property value data are due for release today, followed by local retail sales on Wednesday and the government’s Budget Policy Statement on Thursday. Reserve Bank Governor Alan Bollard will also give a speech on Friday.

The New Zealand dollar rose to 52.97 pence from 52.74 pence and gained to 77.69 Australian cents from 77.55 cents. It was up to 64.77 yen from 64.64 yen.

The trade-weighted index advanced to 73.34 from 73.04.

(BusinessDesk)

BusinessDesk.co.nz

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