New Zealand dollar climbs 1 US ct amid optimism over Europe

Monday 17th October 2011

The New Zealand dollar started the new week one US cent higher from Friday on optimism Europe will make progress while the United States economy shows some signs of life.

The kiwi dollar rose to 80.24 U.S. cents at 8am from 79.31 US cents at 5pm on Friday. It is the highest level since Sept. 20.

Equity markets surged higher at the end of last week on evidence China had inflation under control and on a stronger-than-expected retail sales report for September in the US.

Positive comments from a meeting of Group of 20 finance ministers and central bank chiefs in Paris at the weekend ahead of a European Union summit this weekend also helped sentiment.

Still, Alex Sinton, senior dealer at ANZ, doubted that optimism about progress in Europe would last all of this week.

"I would suspect that some of the optimism may not hold through the week," he said.

The US retail sales figure for September of 1.1 percent was higher than the 0.4 percent ANZ had expected, and the August figure was also revised from flat to 0.3 percent.

Also welcome was news that China's consumer inflation dipped to 6.1 percent in September, supporting the argument that monetary policy measures are working to slow China's booming economy.

The positive data reinforced a short-covering rally and investors were looking for positives from statements in the wake of the G20 finance ministers meeting after the euro zone's 17 member nations last week completed their approval of the expansion of the region's bailout fund.

The French finance minister promised that next weekend's meeting will deliver decisive results, while Bloomberg reported that G20 governments are considering naming as many as 50 banks as systemically important to the global economy and in need of extra capital.

Investors are also awaiting earning guidance from IBM on Monday in the US, followed by results from Apple, Coca-Cola and Intel on Tuesday.

Industrial production and capacity utilisation data is also due on Monday US time followed by producer and consumer inflation on Tuesday and Wednesday, respectively, and weekly jobless claims on Thursday.

The kiwi eased to 77.62 Australian cents from 77.87 cents on Friday but rose to 61.83 yen from 61 yen and to 57.81 euro cents from 57.65 cents.

It rose to 50.74 British pence from 50.41 pence, while the trade-weighted index rose to 70.14 from 69.63.

BusinessDesk.co.nz

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