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Kiwi slips against euro as European data encourages

Wednesday 19th January 2011

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The New Zealand dollar slipped against a broadly stronger euro amid encouraging European economic data.

By 8am today the kiwi was buying 0.5768 euro, down from 0.5808 at 5pm yesterday, while being little changed against the greenback at US77.15c.

The euro rose against the US dollar on buying by sovereign funds and strong German economic data but doubts Europe can boost a rescue fund to head off debt problems may prevent further gains.

At one point the euro had surged more than 1 percent against the US dollar, but the gains were pared as the single currency was pressured by lack of progress at a two-day European debt summit.

Supporting the euro, Germany's ZEW headline economic sentiment indicator surged to its highest reading in six months, while sterling also hit an eight-week high against the greenback after much higher-than-forecast British inflation data.

BNZ currency strategist Mike Jones said the encouraging European economic data had seen markets tentatively bringing forward the expected timing of rate hikes by the European Central Bank and the Bank of England.

Heavy selling of the NZ dollar against the euro and sterling helped drag the kiwi down from an overnight high of US77.40c.

ANZ said inflationary pressures were rife in overnight currency moves, with the NZ dollar underperforming as investors waited for New Zealand inflation data tomorrow morning.

The Australian dollar had been boosted by expectations of inflation created by flood reconstruction and mining growth, ANZ said.

The NZ dollar was at A77.30c by 8am from A77.73c at 5pm, while being little changed at 63.79 yen. The trade weighted index dropped to 69.17 from 69.39.



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