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NZ dollar rises as equities gain on Greek bailout hopes

Wednesday 14th September 2011

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The New Zealand dollar rose against the greenback as equity markets climbed on hopes European officials would provide further support to Greece in order to prevent it defaulting on its debt payments.

The New Zealand dollar recently traded at 82.40 U.S. cents, up from 82.03 cents yesterday, and rose to 72.18 on the trade-weighted index of major trading partners' currencies from 72.04 previously.

Global equities rose after German Chancellor Angela Merkel sought to sooth fears that that Greece was facing an imminent default. She said Greece is taking the right steps to get its next bailout payment, and was "optimistic" that demands for special collateral as part of the Greek bailout package would be met. On Wall Street, the Standard & Poor's rose 1% to 1,174.33 and Europe's Stoxx 600 Index closed 0.9% higher at 220.87.

Still the mood was cautious as investors warily watched developments on Europe debt markets, with yields on Greek 10-year government bonds approaching 25%, and Italy having to pay a 5.6% yield to get the sale of its 5-year bonds away, the highest level since it joined the European Union in 1999.

"We saw a risk rally, although it was a fairly hesitantly raggedy sort of rally, and it doesn't look convincing," said Imre Speizer, a market strategist at Westpac Banking Corp. "I still see the move up in the kiwi as corrective with the lingering backdrop remaining decidedly risk averse."

On the crosses, the kiwi recently traded at 79.91 Australian cents, up from 79.50 cents yesterday, and rose to 63.36 Japanese yen from 63.09 yen previously. It fell to 60.21 euro cents from 60.37 cents yesterday, and rose to 52.19 pence from 51.92 pence previously.

The kiwi may trade between a range of 81.80 U.S. cents and 83.50 cents, Speizer said, with the bias towards further downside corrections on headline risk from Europe.


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