Kiwi gains amid M&A activity

Tuesday 28th September 2010

The New Zealand dollar rose as some US$10 billion worth of mergers and acquisitions were announced on Wall Street, and is poised to hold on to recent gains as investors stay upbeat about the state of the world.

The Standard & Poor's 500 Index held near a four-month high as takeover activity encouraged investors to hold on to their riskier, or higher-yielding, assets.

The kiwi dollar is posed for its first quarterly gain in a year as investors eschewed the greenback and the euro through much of this year as Australasia, through its exposure to Asia, became an attractive option amid heightened fears of a double-dip recession in America and Europe.

The kiwi has gained 7.6% this quarter and 5.5% this month, while the Australian dollar is at the highest level since July 2008, with investors talking of parity with the US dollar.

"It's quarter, month, and half-end for a lot of companies this week, and the quarter should be supportive for Australasian currencies," said Alex Sinton, senior dealer at ANZ New Zealand.

The kiwi will be "looking for guidance from offshore markets".

The kiwi rose to 73.62 US cents from 73.42 cents yesterday, and gained to 66.57 on the trade-weighted index of major trading partners' currencies from 66.47. It increased to 61.99 yen from 61.86 yen yesterday, and fell to 76.36 Australian cents from 76.56 cents. It advanced to 54.60 euro cents from 54.49 cents yesterday, and was little changed at 46.43 pence from 46.39 pence.

Sinton said the currency may trade between 73.30 US cents and 73.90 cents today, and may take a cue from tomorrow's trade data, otherwise it will wait until Chinese manufacturing data comes out later this week.

European Central Bank President Jean Claude Trichet told the European Parliament the economic outlook for the region is broadly in line with the bank's earlier statement this month, and the recovery is expected to continue at a modest pace. More work is needed to cut public debt and bring fiscal deficits under control, he said.

Businesswire.co.nz

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