Kiwi hold euro gains on Greek bailout optimism, but France downgraded

The New Zealand dollar held gains on optimism European finance chiefs will sign up to the next tranche of Greece's multi-billion euro bailout and after France had its credit rating downgraded.

The kiwi traded at 81.84 US cents at 5pm in Wellington, unchanged from 8am and up from 81.34 cents yesterday. It rose to 63.91 euro cents from 63.72 cents yesterday.

Stocks rallied across Asia as investors remained optimistic eurozone finance ministers will grant Greece the next tranche of its rescue package at a meeting in Brussels by granting it more time to comply with harsh austerity measures.

Japan's Nikkei 225 index rose 0.2% in the afternoon, while Hong Kong's Hang Seng gained 0.9%. The euro was also knocked by Moody's Investors Service cutting France's sovereign credit rating a notch to Aa1.

"If they grant Greece more time to meet the fiscal demands, they get a 30 billion euro funding gap which will require restructuring or a greater bailout – that's the bigger issue," says Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney.

"The French downgrade was negative news for the day, but everyone is optimistic. They think something positive might come out of the finance minister meeting" which bolstered the kiwi and Australian dollars, he says.

Investors have also been optimistic about the prospects US legislators will cut a deal to stave off $US607 billion of enforced federal spending cuts and increased taxes, which are seen as likely to push the world's biggest economy back into recession.

The kiwi traded at 66.49 yen from 66.08 yen yesterday after the Bank of Japan kept monetary policy steady ahead of next month's general election, and after expanding the central bank's balance sheet through more asset purchases last month.

Minutes from this month's Reserve Bank of Australia meeting showed the board is considering more rate cuts to spur the economy if the resources boom ends.

The bank unexpectedly kept the target cash rate at 3.25% this month and governor Glenn Stevens is scheduled to give a speech updating his view on the economy today. The kiwi rose to 78.59 Australian cents from 78.38 cents yesterday.

The trade-weighted index advanced to 73.43 from 73.09 yesterday. The currency gained to 51.43 British pence from 51.09 pence yesterday.

(BusinessDesk)