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NZ dollar holds near record high vs euro after EFSF downgrade

Tuesday 17th January 2012

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The New Zealand dollar held above 62 euro cents near a record-high after rating agency Standard & Poor’s cut the European Financial Stability Facility’s rating, and France managed to draw solid demand at its first debt auction since losing its top AAA credit rating.

The New Zealand dollar was trading at 62.72 euro cents, just before 8am, up from 62.69 cents at 5pm yesterday. The kiwi was up to 79.45 US cents, from 79.26 US cents.

S&P cut the EFSF, known as the euro-bailout fund, had its rating cut to AA+ from AAA. That comes several days after a series of ratings downgrades by the agency, including France who lost its AAA rating, and a day before the fund is set to sell 1.5 billion euro worth of bonds.

“The New Zealand dollar is continuing to ride out the storm,” said Alex Sinton, senior dealer at ANZ New Zealand. “We are riding reasonably high against the euro – the news of the downgrade alone not likely to get us through the 63 euro cent mark.”

The mass European downgrades left Germany, the Netherlands, Finland and Luxembourg as the only euro zone countries with the top AAA rating. S&P said it was disappointed with efforts to shore up Europe’s mounting sovereign debt crisis.

The French government sold debt for the first time since losing its triple-A rating, raising 1.9 billion euros of 51-week notes at a yield of 0.4 percent, down from 0.45 percent on Jan. 9. The treasury also sold 4.5 billion euros of three-month notes and 2.2 billion euros of six-month bills. Spain and Greece will also offer debt tomorrow and Jan.19, while Portugal will sell bills on Jan. 18.

It is a heavy week for data in China with industrial production, fourth quarter gross domestic product and retail sales all set for release today. China’s economic growth has remained resilient in the first three quarters of 2011 and domestic activity on track to expand by 8.9 percent in the fourth quarter, according to ASB Institutional Bank.

In New Zealand, the New Zealand Institute of Economic Research quarterly survey of business opinion is set for release this morning, followed by electronic transactions for December this afternoon. The first significant set of New Zealand data for 2012 is due out on Thursday, with the Consumer Price Index, which comes a week before the Reserve Bank of New Zealand’s January official cash rate review, which is widely expected to signal no change at 2.5 percent.

The kiwi fell to 77.02 Australian cents from 77.06 cents and 60.94 yen from 60.97. It gained to 51.85 British Pence from 51.79.
The trade-weighted index fell to 71.16 from 71.23.


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