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New Zealand dollar drifts as markets await Slovakian vote

Wednesday 12th October 2011

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The New Zealand dollar dipped below 78 U.S. cents in overnight trading but started local trading today above that figure as investors monitoring the European sovereign debt crisis focused on the vote in Slovakia to approve the region's rescue fund.

The kiwi dollar was little changed at 78.17 U.S. cents at 8am after falling as low as 77.52 cents overnight from the 78.21 cents at 5pm yesterday.

Investors are waiting to see if differences in the coalition government of Slovakia will stop it from becoming the last of the euro zone's 17 members to approve changes to the 440 billion euro European Financial Stability Facility.

The uncertainty over this has halted a rally in equity markets this week in response to reassurances from the leaders of France and Germany, the two most powerful European economies, that a comprehensive plan will be put in place to resolve the Greek financial crisis and any contagion from it in the European banking system.

The world continues to wait to see if European countries can sort their finances out and restore confidence in their regional financial framework.

The pressure on the New Zealand financial system was also evident yesterday when government accounts showed an operating deficit before investment gains of $18.4 billion, or 9.2% of gross domestic product, in the 12 months ended June 30, mostly due to costs from the Christchurch earthquakes.

"Basically everyone is still waiting for news out of Slovakia on the vote on the Euro fund. We have had America come back overnight but there hasn't been a lot happening," said Stuart Ive, senior trader at HiFX.

He said Alcoa reports after the United States market closes this morning and this kicks off the U.S. third-quarter earnings season. There would be interest in this and the Westpac consumer sentiment survey in Australia today, he said.

The Slovakian vote was expected by about now but it was looking like the debate was continuing longer than expected, he said.

The kiwi was lower at 78.29 Australian cents from 78.47 cents yesterday and eased to 58.89 yen from 59.94 yen.

It was at 57.20 euro cents from 57.38 cents yesterday and at 50.17 British pence from 50.06 pence.

The trade-weighted index eased to 69.05 from 69.16 yesterday.


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