Kiwi gains as European banks post strong earnings

Tuesday 3rd August 2010

The New Zealand dollar gained as European lenders HSBC Holdings and BNP Paribas SA beat earnings estimates, stoking investors’ appetite for riskier, or higher-yielding, assets.

Stocks on Wall Street and in Europe climbed after HSBC, Europe’s biggest bank, doubled first-half profit to US$6.76 billion, while France’s largest lender, BNP Paribas, boosted second-quarter earnings 31% to 2.11 billion euros, quelling fears of a double-dip recession.

The Reserve Bank of Australia reviews its target cash rate today, and is expected to keep rates on hold at 4.5%. The first round of local employment data comes out today, with private sector wages expected to have grown 0.4% in the three months through June.

“Really strong results from HSBC and BNP have people saying ‘risk is on baby’ and thinking the world is a beautiful place,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia.

“The kiwi is respecting the top of its range at 73.50/74 US cents.”

The kiwi climbed to 73.26 US cents from 73.14 cents yesterday and dropped to 67.72 on the trade-weighted index of major trading partners’ currencies from 67.84. It slipped to 63.32 yen from 63.46 yen yesterday, and was little changed at 80.28 Australian cents from 80.26 cents. It fell to 55.63 euro cents from 55.98 cents yesterday, and declined to 46.10 pence from 46.26 pence.

Kelleher said the currency may trade between 73.10 US cents and 73.60 cents today as investors continue to eschew the greenback, with the RBA announcement the big event for the day.

“China’s PMI was weak when it came out on Sunday, but HSBC came out yesterday with a sub-50 PMI – that’s very negative. Everybody ignored it, but it’s something to consider for the RBA,” Kelleher said.

The greenback has been under pressure since the Federal Reserve reiterated interest rates were to remain extraordinarily low for an extended period during this time of “unusual uncertainty” and chairman Ben Bernanke kept it on the back foot yesterday, saying there’s a “considerable way to go to achieve full recovery”.

The Dollar Index, a measure of the greenback against a basket of currencies, dropped 0.6% to 80.92.

Businesswire.co.nz

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