Kiwi holds above 80 US cents, gains on euro likely
BUSINESSDESK: The New Zealand dollar held above 80 US cents and traded within reach of record levels against the euro on optimism the kiwi and its Australian counterpart are relatively appealing given the financial and economic headwinds facing Europe and the US.
The kiwi traded at 80.21 US cents, down from 80.30 cents at the start of the day and up from 80.10 cents yesterday. The trade-weighted index edged up to 72.48 from 72.35 yesterday.
The lack of additional bad news in Europe and the prospects of the Federal Reserve adding more stimulus to the US economy have helped keep the kiwi dollar above 80 cents.
“The 80 will hold,” said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia. “Everything is going to be sensitive to bad headlines out of Europe but nothing major is expected that would really change things” through the end of the week.
The Down Under currencies will gain “as long as volatility stays really, really low as it is now”.
Eurozone finance ministers are due to meet by conference call tomorrow and Reuters reports they will finally approve an agreement to lend up to 100 billion euros to Spain so it can recapitalise its banks.
“Coming up with a solution is so hard,” Mr Tennent-Brown said. “The politicians in Europe have to go back to their own countries and ratify or debate it.”
Spanish bonds yielding around 7% underpin the problems facing Europe, with Mr Tennent-Brown saying those levels are “quite concerning”.
The kiwi rose to 65.41 euro cents from 65.17 cents yesterday, having traded at record levels of around 65.63 euro cents in US trading yesterday.
It dipped to 51.02 British pence from 51.15 pence yesterday and gained to 63 yen from 62.89 yen. It traded at 77.05 Australian cents, little changed from 77.07 cents yesterday.