NZ dollar drops vs. euro on optimism Greece may reach deal with creditors

Monday 22nd June 2015

The New Zealand dollar fell against the euro on optimism ahead of key meetings today that Greece may reach a deal with its creditors.

The kiwi touched 60.56 euro cents this morning, close to its 15 month low of 60.54 cents last Thursday, and was trading at 60.59 cents at 8am from 60.91 cents on Friday in Wellington. The local currency slipped to 68.97 US cents from 69.08 cents at the New York close and 69.17 cents on Friday.

The Greek government at the weekend was preparing new proposals for reforms in a bid to prevent default on a 1.6 billion euro loan from the International Monetary Fund due at the end of this month, boosting optimism about the country's willingness to make concessions. Greek Prime Minister Alexis Tsipras is scheduled to meet the country's key international lenders today ahead of a meeting with the leaders of Eurozone nations as part of an emergency summit in Brussels as they seek to break a deadlock over the debt crisis.

"Today is the day in Europe," said Martin Rudings, senior dealer, foreign exchange, at OMF. "The market is leaning towards the most likely scenario is a deal of some sort, although personally I don't think a deal is a great outcome but I suppose it's slightly better than a default. The market is probably overreacting to something that's slightly better than the worst scenario. It just means kicking the can down the road for a couple of years while they keep bailing out Greece. It's hard to see where it all ends."

Proposed concessions include an end to early retirement next year, an increase in tax surcharges that mid and high income earners pay, and extra levies on businesses, Bloomberg reported, citing a Greek government official who asked not to be named as the plans weren't finalised.

"I don't know if those sorts of concessions are enough to get some deal on the way but it's desperate times today," said OMF's Rudings.

He said the local currency market will likely be in limbo as traders await the outcome of the latest talks tonight, although he favours selling the euro.

In New Zealand today, May monthly data on migration and credit card billings are scheduled for release.

The New Zealand dollar slipped to 88.67 Australian cents from 89.01 cents on Friday, fell to 43.42 British pence from 43.56 pence, and dropped to 84.66 yen from 85.12 yen. The trade-weighted index declined to 71.76 from 71.92 on Friday.

BusinessDesk.co.nz

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