By Paul McBeth
Tuesday 9th December 2008
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Stocks on Wall Street and in Europe advanced after US President-elect Barack Obama proposed the biggest public works program since the 1950s to kick-start the world’s largest economy. The Dow Jones Industrial Average rose 3.9%, prices of oil and copper rose, and resources companies including BHP Billiton, the world’s largest miner, rallied. Lawmakers in the US also made progress on a US$15 billion rescue package for automakers.
“There’s potential for the kiwi to rebound,” said Philip Borkin, economist at ANZ National Bank. The kiwi’s gain reflected “the same old equities correlation” and may extend its gains “if the automakers’ package comes through.”
The New Zealand dollar rose to 54.61 US cents from 54.49 cents yesterday, and fell to 50.65 yen from 59.98 yen. It rose to 82.30 Australian cents from 81.66 cents yesterday, and fell to 42.21 euro cents from 42.25 cents.
Borkin said the kiwi may trade between 53.95 US cents and 54.95 cents today.
In the US, Congress and President George W. Bush are close to finalising the details of the rescue package for the auto industry. General Motors Corp. and Chrysler LLC have almost exhausted their cash reserves, and Ford Motor Co. has joined the other two automakers in trying to protect the industry that employs over three million people.
If the stimulus package is confirmed later today as expected, it could help encourage risk appetite further, which could see further gains for the kiwi dollar, Borkin said.
In New Zealand, the latest Roy Morgan confidence poll showed an showed consumer confidence rose 5.9 points to 105.6, the highest reading since September. The polling company said the election outcome stoked optimism in the outlook for the economy. Also helping lift sentiment, the central bank cut the official cash rate by a record 150 basis points to 5% last week.
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