NZ dollar climbs against euro after ECB leaves door open for negative interest rates

Friday 3rd May 2013

The New Zealand dollar rose against the euro after the European Central Bank cut its deposit rate as expected and left the door open to imposing negative deposit rates.

The kiwi rose to 64.97 euro cents from 64.46 cents at 5pm in Wellington yesterday, and earlier touched 65.08 cents. The local dollar was little changed at 84.88 US cents from 84.90 cents.

The ECB dropped its deposit rate to a record low 0.5 percent from 0.75 percent after policy makers met today and President Mario Draghi said he was open to the idea of a negative rate-to help stem further deterioration in the euro zone economy. Traders are now looking ahead to the US non-farm payrolls on Friday, which are expected to show a bounce back from March's slump to a reading of 140,000 new jobs.

"Lower interest rates will usually push a currency lower and that's what happened to the euro overnight," said Imre Speizer, senior markets strategist at Westpac Banking Corp. Hinting at negative interest rates shows the ECB is willing to consider unconventional measures to restore its economy.

The kiwi probably won't rise above 85.40 US cents today, he said. It was unclear whether the kiwi would benefit from a strong payrolls number.

"Five years ago, before the global financial crisis, a strong US number was positive for the US dollar and negative for the kiwi," he said. "We're on the path back to that normality."

The trade-weighted index rose to 78.31 from 78.09. The kiwi climbed to 83.20 yen from 82.57 yen and was little changed at 82.80 Australian cents. It edged up to 54.68 British pence from 54.62 pence.

BusinessDesk.co.nz

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