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NZ dollar hits 53 euro cents for first time since 2008 as EU mulls Greece bailout

Friday 26th March 2010

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The New Zealand dollar rose above 53 euro cents for the first time since March 2008 as the European Union moves closer to an accord over how to bail-out debt stricken Greece.

The kiwi drifted lower against the US dollar.  The EU summit, which markets hope will finalise a deal to help Greece rein in its fiscal blow-out, kicks off after German Chancellor Angela Merkel told her Parliament that a rescue package should be made up of aid from the International Monetary Fund and the Euro-zone members. Previously, she had dug in her toes and said the bulk should come from the IMF. Investors were wary, with stocks on Wall Street mixed while the Dollar Index, a measure of the greenback against a basket of six currencies, rose 0.3% to 82.04.  

“The focus will be on the headlines coming out of the summit – we need to see something concrete, and if we’re disappointed on that front, the euro will take another move lower,” said Mike Jones, strategist at Bank of New Zealand. “We’re forecasting the kiwi to go to 56 (euro cents) by mid-year.” 

The kiwi went as high as 53.13 euro cents from 52.97 cents yesterday, and recently traded at 53 cents. It dropped to 70.47 US cents from 70.62 cents yesterday, and gained to 66.02 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.90. It gained to 65.37 yen from 64.94 yen yesterday, and edged up to 77.49 Australian cents from 77.43 cents. It increased to 47.51 British pence from 47.21 pence yesterday.  

Jones said the currency may trade between 69.80 US cents and 71 cents today, with good news out of the EU summit potentially pushing it higher. A speech by Reserve Bank of Australia Governor Glenn Stevens today is also likely to support the kiwi.  

New Zealand’s economy grew 0.8% in the three months ended December 31, according to government data out yesterday, and Jones said this helped support the kiwi dollar, which outperformed in the London and New York trading sessions.  

Data out today will show the country’s trade balance probably made a surplus of $480 million last month, according to a Reuters survey, though Jones doubts this will have much impact on the kiwi.

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