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UPDATED: NZ dollar jumps more than 1 US cent on Spanish bond sale, ECB lending

Wednesday 21st December 2011

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(Removes extraneous reference to TWI in final paragraph, updates prices). The New Zealand dollar gained more than 1 US cent after a successful Spanish bond sales and after the European Central Bank offered more support for the region’s lenders, easing concern Europe’s debt crisis is worsening.

The kiwi dollar rose to 76.83 US cents at 9:25am, from 75.89 cents at 5pm yesterday. It reached a high of 77.11 cents. The trade-weighted index increased to 68.75 from 68.21.

Spain sold $5.6 billion euros of three-month and six-month bills, exceeding the maximum target of $4.5 billion euros, while the European Central Bank said it will give banks two opportunities to borrow money at 1 percent. In Germany, Europe’s largest economy, business sentiment rose in December, based on a monthly survey of some 7,000 companies.

“It’s all rosy out of Europe – but trust me the money won’t be going anywhere but the banks,” said Tim Kelleher, head of institutional FX sales NZ ASB Institutional. The rise in the kiwi is being viewed as a relief rally, “it is safe-haven buying. If you are going to park your money somewhere over Christmas it may as well be here,” Kelleher said.

Government figures today are expected to show the current account deficit widened to $3.8 billion in the third quarter from a deficit $920 million dollar three months earlier. The annual gap grew to $8 billion, or 3.9 percent of gross domestic product, from $7.5 billion, according to a Reuters survey of 11 economists.

This morning, prices of dairy products fell for the first time in three sales on Fonterra Cooperative Group’s GlobalDairyTrade platform, with declines in most of the products on offer. GDP is released tomorrow, with the market expecting a 0.6 percent rise in the third quarter after eking out a gain of just 0.1 percent three months earlier.

The kiwi increased to 58.85 euro cents from 58.35 cents yesterday, and was at 59.85 yen from 59.16 yen. It rose to 49.07 British pence from 48.89 pence yesterday. It was little changed at 76.38 Australian cents to 76.4.

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