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NZ dollar back up as Greece approves budget cuts

Monday 13th February 2012

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The New Zealand dollar clawed back losses after Greece’s Parliament approved a series of budget cuts that will let the Mediterranean nation tap regional funding and stave off a default on debt repayments.

The kiwi rose to 83.27 US cents at 5pm from 82.73 cents at 8.30am and 83.08 cents last week. It gained to 73.08 on the trade weighted index from 72.88.

Investors’ upbeat sentiment was renewed after the Greek Parliament voted in favour of austerity measures, including more than a 20 percent reduction in the minimum wage and cutting one in five civil service jobs.

The vote, which was passed with 199 in favour and 74 opposed, will let the heavily indebted nation tap a second regional aid package worth 130 billion euros, provided European finance chiefs agree at a Wednesday vote. The passage of the cuts sparked a reported 100,000-strong protest in Athens, as part of the lead-up Greece’s April general election.

“They were always going to pass the package, the question is where are they going to get 325 million euros from” by Wednesday, said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. “It was surprising how well things recovered,” as so-called risk-sensitive assets such as the kiwi clawed back earlier losses, he said.

Local retail sales on Wednesday and the government’s Budget Policy Statement on Thursday will attract attention, as will a speech by Reserve Bank Governor Alan Bollard on Friday.

Traders are poised for a heavy data week in the US and Europe, including American retail sales and industrial production and Germany’s economic sentiment. The Federal Open Market Committee’s minutes for its last meeting are also scheduled for release this week.

A BusinessDesk survey of five strategists predicts the kiwi will trade between 81 US cents and 84 cents this week.

The kiwi rose to 62.87 euro cents from 62.65 cents last week, and increased to 52.74 pence from 52.58 pence. It was little changed at 77.55 Australian cents from 77.46 cents last week, and advanced to 64.64 yen from 64.49 yen.


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