NZ dollar climbs 1 US cents

Friday 16th March 2012

The New Zealand dollar rose more than 1 US cent after stocks on Wall Street extended their rally after upbeat American manufacturing and employment data stoked investors’ appetite for higher-yielding, or riskier, assets.

The New Zealand dollar jumped to 82.11 US cents at 8am from 81.02 cents yesterday at 5pm. The trade-weighted index rose to 73.33 from 72.75.

Stocks on Wall Street extended their rally this week, with the Standard & Poor’s 500 Index up 0.5 percent to 1402.95, its highest level since 2008. That came after manufacturing and employment data in the US beat expectations as the world’s biggest economy continues to show signs of sustained recovery, stoking investors’ appetite for bigger returns.

“As markets sought our more ‘risky’ assets the USD was on a gradual downward path, giving up much of its previous day’s gains,” said Kymberly Martin, strategist at Bank of New Zealand. “The NZD started on a steady upward path, underpinned by solid global risk appetite.”

Still, the rapid gain in the kiwi dollar was on thin trading volumes, leaving it vulnerable to increased volatility, according to Tim Kelleher, head of institutional FX sales NZ ASB Institutional.

“The move is really down to a liquid kiwi,” Kelleher said “It is extremely thin out there in kiwi-land so some of the moves will be exaggerated.”

Fitch Ratings said the United Kingdom is at risk of losing its top investment grade, and changed its outlook for Britain to negative from stable, indicating a “slightly greater” than 50 percent chance the nation will lose its AAA grade within two years.

Fitch revised down the Bank of England's credit rating outlook to negative and affirmed its AAA rating. The New Zealand dollar gained to 52.19 British pence from 51.72 pence

Standard & Poor's also reiterated its negative outlook on the US credit rating after cutting it from AAA to AA+ last August.

“The ratings agencies were busy overnight – it indicates that it is not getting any better out there in Europe,” Kelleher said.

The kiwi dollar rose to 62.68 euro cents from 62.16 cents after the International Monetary Fund approved a 28-billion euro bailout for Greece. The bailout is part of a broader international rescue package and will immediately provide the indebted nation with 1.65 billion euros it needs to avoid default.

There is no data set for release in New Zealand today. Gross domestic product and current account for the December quarter will both be released next week.

The New Zealand dollar increased to 77.80 Australian cents from 77.46 cents. It advanced to 68.44 yen from 68.15 yen.

BusinessDesk.co.nz

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