NZ dollar falls amid uncertainty over Greece bailout plant

Monday 15th February 2010

The New Zealand dollar fell amid growing uncertainty over the European Union’s plan to bail out Greece from its fiscal woes, which sapped investors’ appetite for riskier, higher-yielding, assets.

European officials warned there won’t be any more talk of economic assistance for Greece until there’s clear evidence of spending cuts, creating uncertainty over whether the European Union will continue to let the debt-stricken Mediterranean nation weigh on the region.

Euro-zone gross domestic product grew 0.1% in the fourth-quarter last year, below the expected 0.3% gain, and in stark contrast to strong retail sales growth across the Atlantic. US retail sales grew 0.5% last month, while consumer sentiment dipped according to the University of Michigan consumer confidence survey.

“We’re still in a waiting game over the Greece situation – we’ll continue to see risk aversion while we wait for some official comment on when the assistance will be provided,” said Mike Jones, strategist at Bank of New Zealand.

“The fundamentals under the kiwi are still pretty solid with the rally last week only suffering a temporary setback.”

The kiwi dollar dropped from 69.75 cents to 69.65 US cents on Friday in New York, and edged down to 64.61 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 64.68.

It slipped from 62.89 yen to 62.71 yen on Friday, and declined from 78.46 cents to 78.36 Australian cents. It was little changed at 51.14 euro cents from 51.18 cents last week, and inched up from 44.38 pence to 44.39 pence.

Jones said the currency may trade between 69.10 US cents and 70.30 cents today and will take its cues from offshore as it waits on the Greek decision.

With the US closed today for George Washington’s Birthday, and China celebrating its New Year, markets will likely be relatively illiquid.

The People’s Bank of China helped damp investors’ appetite for risk after it raised the reserve requirement ration another 50 basis points, its second hike this year, as it seeks to limit lending and keep a lid on inflation.

Local investors will be keeping an eye on equities today as New Zealand’s earnings season kicks on with Auckland International Airport and logistics company Freightways reporting today.

After a murky 2009, people are looking for more guidance from some of the major companies after Telecom set a dull tone to the season with soft earnings last week.

Businesswire.co.nz

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