Dollar pushes above 69 US cents amid prospect of relief for Greece

Wednesday 10th February 2010

The New Zealand dollar pushed above 69 U.S. cents as investors returned to riskier, or higher-yielding, assets amid speculation the European Union will help rescue Greece from its fiscal woes.

Stocks in Europe and the U.S. gained after European Central Bank President Jean-Claude Trichet postponed a meeting with Sydney bankers to attend a special EU meeting, while Ollie Rehn, who will become Europe’s economic affairs commissioner, said the EU could offer “support in the broad sense of the word” to Greece, according to Bloomberg. The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 3.8% to 25.51. Sovereign credit woes in some European nations sapped investors’ appetite for riskier assets in recent weeks, putting growth sensitive currencies such as the kiwi under pressure.

Trichet’s decision to put off his meeting “pointed to the fact about the Greek situation, and the market turned positive,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia. “The kiwi and all other risk currencies went up.”

The New Zealand dollar jumped to 69.33 U.S. cents from 68.92 cents yesterday, and gained to 64.20 on the trade-weighted index, or TWI, which measures the currency against the greenback, yen, euro, pound and Australian dollar, from 64. It rose to 62.12 yen from 61.70 yen yesterday, and was little changed at 79.03 Australian cents from 79.11 cents. It edged up to 50.33 euro cents from 50.23 cents yesterday, and slipped to 44.15 pence from 44.18 pence.

Kelleher said the currency may trade between 69.10 U.S. cents and 69.50 cents today and will probably go sideways until a firm announcement is made about Greece.

Currency markets largely ignored Prime Minister John Key’s opening speech to Parliament yesterday which outlined the government’s plan. Key flagged an increase to GST and the removal of depreciation tax breaks on property to help offset cuts to personal and company tax rates, though he didn’t go into any detail.

The next major piece of local data the markets are waiting for is the Real Estate Institute survey of house prices and sales volumes for January, which is expected to come out some time this week. Property values rose 4.4% in the 12 months ended January 31 in a “patchy” first month of the year, according to state-owned valuer QV Valuations.

Central bank Governor Alan Bollard told TVNZ’s Q&A programme the housing market hasn’t worked itself up into another boom as initially feared. The revival in the property market last year helped underpin the country’s economic recovery as a short supply of listings and inflow of returning expatriates drove up house prices.

Businesswire.co.nz

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