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Kiwi rises toward US73c on weak American data

Friday 16th July 2010

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The New Zealand dollar continued its march towards 73 US cents as investors eschewed the greenback amid more weak American data and awaited today’s local inflation release.

Investors unwound their holdings in the US dollar as downbeat manufacturing data painted a grim picture of the world’s biggest economy, a day after the Federal Reserve downgraded its view on America’s outlook.

Stocks on Wall Street were mixed as investment bank Goldman Sachs Corp. paid US$550 million in a settlement with the Securities Exchange Commission over its civil fraud case.

New Zealand’s consumer price index rose 0.5% in the three months through June, according to a Reuters survey, and isn’t expected to give any indication as to the track of monetary policy, with the major inflationary pressures coming in the third and fourth quarters this year.  

“The overriding theme for the US economy is that investors are starting to sell the US dollar and are heading into other major currencies,” such as the euro, said Khoon Goh, senior markets economist at ANZ New Zealand.

“The CPI data will hold the market’s attention for a split-second as it looks to get a reaction before everybody goes back to watching the euro and Asian markets.”

The kiwi jumped to 72.75 US cents from 72.18 cents yesterday and climbed to 68.38 on the trade-weighted index of major trading partners’ currencies from 68.11. It was little changed at 63.58 yen from 63.53 yen yesterday, and gained to 82.54 Australian cents from 81.86 cents. It slipped to 56.27 euro cents from 56.41 cents, and was unchanged at 47.09 pence.  

Goh said the currency will probably look to retest its May 3 peak at 73.06 US cents and may break it if investor sentiment holds.

Underpinning investor optimism was more good news in the US earnings season, with lender JP Morgan Chase & Co. beating expectations as it posted adjusted earnings of 73 US cents per share in the quarter, ahead of the forecast 67 cents.

Google fell short of forecasts, posting adjusted earnings of US$6.45 per share, compared to the expected US$6.52.  

The US Senate passed legislation clamping down on the financial sector, which will impose new rules for banks and require hedge funds to register with the SEC.

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