Kiwi holds above US70c as German data bolsters confidence in Europe

Friday 9th July 2010

The New Zealand dollar held above 70 US cents for a second day after stronger than expected German data helped bolster confidence in the debt-plagued Euro-zone and stoked investors’ appetite for higher-yielding, or riskier, assets.

Stocks in Europe and on Wall Street extended their gains as German industrial production beat expectations and climbed 2.6% last month, allaying fears that all of the Euro-zone has been tainted by the sovereign debt crisis.

European Central Bank President Jean Claude Trichet said there were too many pessimists in respect to the region’s outlook, and, like the Bank of England, kept the benchmark interest rate on hold.

The upbeat sentiment was helped by the International Monetary Fund lifting its expected forecast for global growth to 4.6% due to strong expansion in Asia and renewed private demand in the US.

“Positive industrial production news from German was a sign that it’s not the entire Euro-zone that’s a basket-case and some economies are doing well,” said Khoon Goh, senior markets economist at ANZ New Zealand.

“The kiwi piggy-backed off the euro, which continued to hold on to gains.”

The kiwi edged up to 70.91 UScents from 70.74 cents yesterday, and gained to 67.20 on the trade-weighted index of major trading partners’ currencies from 67.08. It was little changed at 80.82 Australian cents from 80.78 cents yesterday, and traded at 62.32 yen from 62.34 yen. It held at 55.83 euro cents from 55.84 cents yesterday, and increased to 46.74 pence from 46.65 pence.

Goh said the currency may trade between 70.34 US cents and 71.21 cents today, and will try to break above 71 cents in the local session after “it tested the 71 level three times and was rejected” in the New York and London sessions.

Local data on electronic cards spending isn’t expected to weigh on the currency, though it will give an indication on consumer appetite.

Goh said tomorrow’s Chinese export data will be the next catalyst for moving the currency around as investors try to get a handle on whether concerns the world’s third biggest economy is grinding into a slowdown are warranted.

Businesswire.co.nz

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