Kiwi gains after Moody's affirms investment-grade Spanish credit rating

BUSINESSDESK: The New Zealand dollar gained after Moody's Investments Service affirmed an investment grade rating for the heavily-indebted Spain, spurring investors to ditch the greenback and seek higher-yielding, or riskier, assets.

The kiwi rose to 81.72 US cents at 5pm in Wellington from 81.28 cents at 8am and 81.40 cents yesterday. The trade-weighted index slipped to 72.69 from 72.80 yesterday.

The Dollar Index, a measure of the greenback against a basket of currencies, fell to a month-low 79.15 as investors' confidence was bolstered by Moody's retention of Spain's Baa3 credit rating.

Traders have been waiting for the Mediterranean nation to seek a bailout from its regional partners as it contends with mounting sovereign debt, and its dithering has sparked fears the debt crisis may spread to larger European economies.

"There was a pretty strong bounce in the euro after Moody's didn't cut Spain to junk," says Tim Kelleher, head of institutional FX sales at ASB Institutional in Auckland. "The kiwi rallied on the back of a higher euro and Aussie."

Rumours that Greece had reached an agreement with lenders the International Monetary Fund, European Commission and European Central Bank fuelled optimism Europe may contain its regional debt woes.

That comes ahead of a two-day European Union leaders' summit that kicks off on Friday. The kiwi fell to 62.42 euro cents from 62.93 cents yesterday.

Investors will be watching the dump of third-quarter Chinese data tomorrow, including gross domestic product, retail sales and industrial production. The world's second-biggest economy has embarked on measures to stimulate its economy to soften its slowdown.

New Zealand's currency got a fillip from stronger dairy prices today after whole milk powder prices posted their biggest gain since March last year at Fonterra's online auction.

The kiwi fell to 79.26 Australian cents from 79.46 cents yesterday and was little changed at 64.32 yen from 64.28 yen. It edged down to 50.67 British pence from 50.76 pence yesterday.