Sharechat Logo

NZ dollar gains as ECB's Draghi sets bond buying programme

Friday 7th September 2012

Text too small?

The New Zealand dollar rose after European Central Bank President Mario Draghi announced a bond-purchase plan to cap borrowing costs in the area's most-indebted nations, stoking optimism the region will get through its sovereign debt crisis and pushing stock markets higher.

The New Zealand dollar rose to 80.10 US cents at 8am in Wellington up from 79.56 cents yesterday at 5pm. The trade weighted index increased to 72 from 71.62.

Draghi kept his pledge to do "whatever it takes" to safeguard the euro as policymakers agreed on an unlimited debt-buying programme, targeting government bonds with a maturity of one to three years. Conditions of the agreement are yet to be finalised.

Stock markets on both sides of the Atlantic rallied on the news. German's DAC 30 climbed 2.9 percent, while Wall Street's Standard & Poor's 500 Index rose 1.9 percent and the Dow Jones Industrial Index gained 1.8 percent.

"Given the reaction in equity markets we would be looking at a positive day following through to risk currencies," such as the New Zealand dollar, said Tim Kelleher, head of institutional FX sales NZ ASB Institutional. "Certainly the initial reaction from Europe has been good - there are conditions attached to anyone who wants a bailout though."

The New Zealand rose to 63.35 euro cents from 63.13 cents.

Underpinning the mood was favourable data out of the world's largest economy, the US. Jobless claims fell 12,000 to 365,000 in the week ended Sept. 1, according to Labor Department data. That comes ahead of Friday's nonfarm payrolls report which is expected to show 125,000 jobs were added in August, down from 163,000 in July.

Investors will be looking to see whether the data is weak enough to spur the Federal Reserve into announcing a third round of asset purchases.

"If you start seeing better employment data the Fed won't do QE3," Kelleher said.

New Zealand's wholesale trade survey for June from Statistics New Zealand will be released today.

The New Zealand dollar increased to 63.21 yen from 62.40 yen. The kiwi rose to 50.28 British pence from 50.06 pence. It was little changed on 77.93 Australian cents from 77.87 cents.

BusinessDesk.co.nz

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar gains on G20 preference for growth
NZ dollar dips as Wellington CBD checked for quake damage
NZ dollar gains, bolstered by RBA minutes, strong dairy prices
NZ dollar falls after central bank says it may scale up currency intervention
NZ dollar gains before CPI, helped by dairy gains, rally on Wall Street
NZ dollar trades little changed as US budget talks bear down on deadline
NZ dollar falls with equities on view US to sail over fiscal cliff
NZ dollar weakens as fiscal cliff looms, long bets unwind
NZ dollar sinks to three-week low as equities fall, fiscal talks in focus
NZ dollar slips as fiscal cliff talks grind slower in Washington

IRG See IRG research reports