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Kiwi holds gains as US data buoys risk appetite

Friday 3rd September 2010

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The New Zealand dollar held on to yesterday’s gains as solid US data helped keep investors upbeat ahead of today’s American employment data.

Stocks on Wall Street gained as US home sales unexpectedly rose in July, stoking investors’ appetite for riskier, or higher-yielding, assets and locking in yesterday’s rise amid a stronger American manufacturing sector.

That comes ahead of non-farm payrolls data, which will likely show the US economy shed 100,000 jobs last month, according to a Reuters survey. Growth sensitive currencies were supported by solid demand in auctions for Spanish and French government bonds.  

“Equities closed pretty strongly and followed on from yesterday’s significant upward move – the only thing that would halt that is a soft payrolls number in the US,” said Imre Speizer, market strategist at Westpac.

“If payrolls is around expectations or better, we could see interest in equities, that would move kiwi to 72 US cents.”

The kiwi was little changed at 71.49 US cents from 71.59 cents yesterday, and slipped to 66.49 on the trade-weighted index of major trading partners’ currencies from 66.64. It slipped to 60.22 yen from 60.36 yen yesterday, and fell to 78.39 Australian cents from 78.78 cents. It was little changed at 55.75 euro cents from 55.80 cents, and edged down to 46.44 pence from 46.49 pence.

Speizer said the currency may trade between 71 US cents and 72 cents today as it waits for the American employment data, and until then, will follow Asian equity markets.

The European Central Bank kept rates on hold at 1%, and extended its short-term liquidity facility until 2011, as expected. The ECB expects Euro-zone economies to grow 1.6% this year, up from a previous 1% forecast.

The Swedish krona gained 1% to 7.238 per US dollar after the Sweden’s Riksbank unexpectedly boosted its policy rate 25 basis points to 0.75%. The kiwi fell to 5.1715 krona from 5.1938 krona yesterday.

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