Kiwi holds below US 69c ahead of QSBO, RBA review

Tuesday 6th July 2010

The New Zealand dollar held below 69 US cents for the fourth straight day as weak European equity markets sapped investors’ appetite for higher yields, ahead of the closely watched Quarterly Survey of Business Opinion and the Reserve Bank of Australia’s interest rate review.

Investors’ appetite for risk dwindled as European stocks declined in a quiet London session, amid fears of a double-dip recession, while Wall Street was on holiday for Independence Day.

The New Zealand Institute of Economic Research’s QSBO will likely give the kiwi dollar its lead, though any improvement in business sentiment will have a muted affect on the currency which is at the whim of offshore events. Investors will be looking to see what the RBA has to say about the global economy when it reviews its target cash rate. The central bank is expected to keep rates on hold at 4.5%.

“The double-dip is still dominating the market, and the data is pretty weak at the moment, particularly in New Zealand,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia.

“The economists are pretty excited about the NZIER survey, and once it’s had some good analysis, we might see the kiwi move."

The kiwi slipped to 68.78 US cents from 68.91 cents yesterday, and declined to 65.98 on the trade-weighted index of major trading partners’ currencies from 66.10. It dropped to 60.33 yen from 60.48 yen yesterday, and was little changed at 81.94 Australian cents from 81.95 cents. It decreased to 54.84 euro cents from 55.01 cents yesterday, and edged down to 45.43 pence from 45.56 pence.

Kelleher said the currency may trade between 68.50 US cents and 69.10 cents today, with markets still thin after the US holiday.

The kiwi and Australian dollars were bolstered yesterday by merger and acquisition activity with Thailand’s Banpu buying what it didn’t own of Australia’s Centennial Coal. for A$1.7 billion and Wilmar International spending A$1.5 billion on CSR.

Traders will be watching US markets when they return from a long weekend, with non-manufacturing PMI data expected to show the services sector is still expanding, but at a slower pace.

Fonterra Cooperative Group’s online auction held in the US on Tuesday will likely show dairy prices continued to pull back from their highs on the globalDairyTrade platform earlier this year as Northern Hemisphere production gets into full swing.

Businesswire.co.nz

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