Kiwi gains against 'no mates' greenback

Wednesday 29th September 2010

The New Zealand dollar gained amid speculation the US Federal Reserve will embark on its second round of buying Treasuries and mortgage-backed securities in November, sapping investors' appetite for the greenback.

The Dollar Index, a measure of the US dollar against a basket of six currencies, fell 0.9% to an eight-month low 78.98 after hedge fund adviser Medley Global Advisors said the Fed will ramp up its quantitative easing programme in November to revive the flagging economy.

Investor support for the greenback was also dented by weaker-than-expected US consumer confidence, which fell to a seven-month low.

"The market's being driven by sentiment, not by any physical data," said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia.

Support for the greenback "is like it's on Facebook and it's got no friends," keeping the kiwi near the top of its range, he said.

The kiwi climbed to 73.87 US cents from 73.07 cents yesterday, and rose to 66.61 on the trade-weighted index of major trading partners' currencies from 66.30 yesterday.

It advanced to 61.98 yen from 61.51 yen yesterday, and was little changed at 76.36 Australian cents from 76.32 cents.

It slipped to 54.41 euro cents from 54.50 cents yesterday, and gained to 46.80 pence from 46.23 pence.

Kelleher said the currency may trade between 73.50 US cents and 74.25 cents today, with support for risk-sensitive currencies getting to extreme levels with the market 96% bullish on the euro.

"If we get strong US data this week, it could implode pretty quickly," he said.

US housing data improved for the fourth straight month, and stocks on Wall Street gained, as it nears the end of one of the strongest monthly rallies of the past 20 years.

Concerns about European sovereign debt flared up again after Standard & Poor's said Ireland's credit rating was vulnerable if its bailout of Allied Irish Bank could exceed 35 billion euros, while speculation was rife Moody's Investors Service plans to downgrade Spain's credit rating.

Businesswire.co.nz

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