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Kiwi rises against Ausi dollar after unclear federal election

Monday 23rd August 2010

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The New Zealand dollar rose against is Australian counterpart and held above 70 US cents after Australia’s Federal election resulted in no clear winner, creating uncertainty in currency markets.

The Australian election threw up the potential for a hung Parliament, with neither the reigning Labor party nor the Liberal Coalition able to command an outright majority, leaving markets none-the-wiser as to the direction of the world’s 13th biggest economy for the next parliamentary term.

The Australian dollar dropped 0.2% to 88.58 US cents, though the kiwi held on to some support as investors looking for yield gains jumped across the Tasman.

Investor sentiment was dented on Friday after European Central Bank council member Axel Weber told Bloomberg TV the region’s central bank should keep its stimulus in place until the end of the year.  

“It’s clearly going to be negative for the Aussie currency for some time, though it’s uncertain how people will express that on the cross-rates, whether it’s the US, the yen or the kiwi,” said Imre Speizer, markets strategist at Westpac.

“The kiwi could be supported initially, but it will get weakness creeping up on it later on” as investors shun the trans-Tasman currencies, he said.

The kiwi increased to 70.41 US cents from 70.25 cents on Friday in New York, and gained to 79.47 Australian cents from 79.16 cents. It gained to 60.23 yen from 60.03 yen last week, and advanced to 66.19 on the trade-weighted index of major trading partners’ currencies from 65.91. It rose to 55.43 euro cents from 55.26 cents last week, and was little changed at 45.37 pence from 45.27 pence.

Speizer said the currency may trade between 70 US cents and 70.80 cents, and is vulnerable to a break below 70 cents if the Australian dollar drops below 88.40 cents, a key level for the currency.

Germany’s Finance Ministry expects Europe’s biggest economic recovery will slow in the second half of the year, while the European Commission said Greece is on track to meet its targets to cut its fiscal deficit this year.

Businesswire.co.nz



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