NZ dollar holds gains as traders await Greek proposal in increasingly volatile markets

Thursday 9th July 2015

The New Zealand dollar held onto its overnight gains in local trading as investors wait for the Greek government to put forward a debt proposal to European leaders against a backdrop of increasingly volatile financial markets.

The kiwi traded at 67.30 US cents at 5pm in Wellington, from 67.27 cents at 8am and up from 66.43 cents yesterday. The trade-weighted index rose to 71.03 from 70.31 yesterday.

The Chicago Board Options Exchanges Volatility Index, know as Wall Street's 'fear gauge', has risen to a five-month high on uncertainty over Greece, a 32 percent slump in Chinese stocks over the past month and falling commodity prices. Greek Prime Minister Alexis Tsipras told European leaders he will submit detailed proposals to justify new funding after the Mediterranean nation's public voted against adopting harsh austerity measures to access funding, which has heightened market sensitivity.

"It feels like a bit of an environment where it's a bit dangerous to have any direction," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand in Auckland. "Kiwi could squeeze a little bit more if things become more uncertain, but equally if things don't become more uncertain and China settles down a little bit, it looks like it will take a little for people to go back into their short positions."

Tuck said the local currency is still likely to head lower over the longer-term, and that any rallies are opportunities to sell the kiwi.

New Zealand government data today showed core retail spending on credit and debit cards was unchanged in June, with economists saying it appeared as though household consumption had peaked.

The government sold $200 million of bonds maturing in April 2027 today, attracting bids totalling $677 million. The notes, paying a coupon of 4.5 percent, sold at an average yield of 3.38 percent.

New Zealand's two-year swap rate rose to 2.95 percent from 2.91 percent yesterday, and the 10-year swap rate increased to 3.73 percent from 3.71 percent.

Australian government figures today showed the nation added more jobs than expected last month, with an unemployment rate of 6 percent just below forecasts. The kiwi advanced to 90.13 Australian cents at 5pm in Wellington from 89.76 cents yesterday.

The local currency gained to 43.77 British pence from 43.02 pence ahead of the Bank of England policy meeting, which is expected to show no change in monetary policy.

The kiwi increased to 60.79 euro cents from 60.34 cents yesterday, and rose to 81.68 yen from 81 yen. It gained to 4.1796 Chinese yuan from 4.1246 yuan yesterday.

BusinessDesk.co.nz

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