NZ dollar nears three-month high as Europe firms up Greece package

Monday 12th April 2010

The New Zealand dollar neared a three-month high after European finance ministers and central bankers agreed to the final terms of a package to bail-out Greece.

The European Union and International Monetary Fund will offer the Mediterranean nation 60 billion euros worth of debt in three-year loans at the IMF’s special drawing rights’ rate plus 300 basis points, plus a 50 point charge, and 100 basis points more for longer-term loans. The Greek 10-year bond spread with German bunds narrowed to below 400 basis points, while the euro surged 1.8% to US$1.3633 as the news leaked to the market. Investors’ appetite for higher yields followed the euro higher, with the Volatility Index, known as Wall Street’s ‘fear gauge,’ falling 2.6% to 16.14.

“The euro was by far the top-performing currency, and that’s taking up other risk currencies with it,” such as the kiwi and Australian dollars, said Imre Speizer, markets strategist at Westpac Banking Corp. “When the world’s going well, the kiwi gets a clear boost.”

The kiwi jumped to 71.90 US cents from 71.21 cents on Friday in New York, and gained to 66.27 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 66.16. It rose to 66.80 yen from 66.71 yen on Friday, and edged up to 76.69 Australian cents from 76.49 cents. It sank to 52.71 euro cents from 53.19 cents last week, and increased to 46.57pence from 46.30 pence.

Speizer said the currency may trade between 71 U.S. cents and 71.80 cents today, and will probably head towards 72.50 cents this week as global sentiment underpins so-called risk currencies.

Last week, China recorded its first trade deficit in six years, though Commerce Minister Chen Deming said this was likely a temporary setback when seasonal labour shortages in textile imports are alleviated.

Stocks on Wall Street gained on Friday after data showed inventories are increasing as firms begin to ramp up investment, with the Standard & Poor’s 500 to 0.7% to a new 12-month high, and the Dow Jones Industrial Average briefly rose above 11,000 for the first time since September 2008.

Businesswire.co.nz

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