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NZ dollar rises as Greece's New Democracy party takes the lead

Monday 18th June 2012

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The New Zealand dollar rose after Greece’s New Democracy party opened up a narrow lead in the second round of elections, with the result likely to see the indebted nation stay in the euro-zone.

The New Zealand dollar rose to 78.88 US cents at 8am from 78.75 cents at the close of trading of New York on Friday and 78.30 cents at 5pm on Friday. The trade weighted index increased to 71.18 from 70.91.

Early projections show the New Democracy party, which broadly supports the European Union's austerity measures, leads the polls on 28.6 percent to 30 percent, according to the nation's state-run television NET. Anti-bailout party Syriza has 27.5 to 28.4 percent of the vote, while the Socialist Pasok party is in third place on about 12 percent.

"It looks like a surprising peaceful resolution," said Mike Jones, market strategists at Bank of New Zealand. "Markets have got the result they wanted and that is keeping risk appetite buoyant."

"The kiwi will continue to climb on the coat-tails of the euro - that mood will continue over the next few days," Jones said.

The Greek elections have been viewed by investors as a make-or break for the nation's participation in the euro-zone.

The Group of 20 leaders will meet in Mexico on Monday for a two day summit, with Europe's financial crisis and its risk to the global economy likely to be the main focus. German Chancellor Angela Merkel is under pressure to relax Greece's austerity requirements provided the new government stands by the EU-led bailout program. G20 leaders are also expected boost the 430 billion euro firewall announced in April by the International Monetary Fund.

In New Zealand, the BNZ-Business NZ performance service index is due out this morning. The performance manufacturing index released on Friday rose 7.5 points last month, to 55.7 points. That's the fastest clip for the month since May 2006.

The New Zealand dollar fell to 62.22 euro cents from 62.30 cents at the close of New York trading. The kiwi rose to 78.13 Australian cents from 78.09 cents and increased 50.20 British pence from 50.08 pence. It gained to 62.17 yen from 61.97 yen.

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