Kiwi at five-week high against euro, pound over economic recovery concern

The New Zealand dollar rose to its highest in more than five weeks against the euro and the pound as concern about weakness in the European and UK economies contrasts with a brighter picture here.

The kiwi jumped as high as 53.01 British pence, recently trading at 52.82 pence from 52.23 pence at the 5pm market close in Wellington yesterday. It rose as high as 61.57 euro cents, recently trading at 61.44 cents from 60.62 cents yesterday. It gained to 78.62 US cents from 78.03 cents yesterday.

The euro fell after European Central Bank official Joerg Asmussen suggested the central bank was unlikely to change its accommodative stance for at least 12 months, while the pound slid after a report showed UK manufacturing unexpectedly shrank in May.

In contrast, the kiwi is stronger as a report showed business confidence held at a three-year high in the second quarter, keeping an interest rate rise next year on the agenda.

"The eurozone has shown tentative signs of improvement in recent months" but the prospects remain "fragile" and "uneven", ANZ New Zealand economist Con Williams says in a note. In contrast, the New Zealand economy is "still performing".

Finance Minister Bill English told parliament yesterday the annual budget deficit may be $5.5 billion, or $2 billion narrower than forecast in the 2012 Budget.

The International Monetary Fund yesterday revised down its global growth forecast for 2013 to 3.1 percent from 3.3 percent, citing weakness in key developing areas such as China and a protracted recession in Europe.

It said Europe was likely to contract 0.6 percent this year, worse than its previous forecast of 0.3 percent. China's growth forecast was scaled back to 7.8 percent from 8.1 percent.

Trade data scheduled for release in China today will be closely watched for signs of a slowdown. China is New Zealand's second largest trading partner and Australia's largest.

In the US today, Federal Reserve chairman Ben Bernanke speaks at the National Bureau of Economic Research in Boston. The Fed also releases the minutes for its June 18-19 meeting.

The trade-weighted index rose to 75.25 from 74.69 yesterday.

The kiwi was little changed at 85.50 Australian cents. A report on Australian consumer confidence will be closely watched today after a weak business confidence report yesterday.

The kiwi increased to 79.35 yen from 78.55 yen yesterday.

(BusinessDesk)