Kiwi rises on improving local business confidence

BUSINESSDESK: The New Zealand dollar rebounded in local trading after a survey showed local business confidence improved in the first quarter, shrugging off concerns the European debt crisis is worsening.

The kiwi rose as high as 81.76 US cents from 81.47 cents at 8am and traded at 81.64 cents at 5pm in Wellington.

The currency fell from 82.01 cents at 5pm yesterday.

The New Zealand Institute of Economic Research’s quarterly survey of business opinion found a net 24% of surveyed businesses are optimistic about the coming quarter, up from a net 1% in the previous survey.

This comes amid global concern that the European sovereign-debt crisis is worsening after renewed concerns about Spain’s debt reduced demand for higher-yielding assets, like the kiwi.

“Spain, that is the key driver at the moment because it is the hardest one to fix,” said Chris Weston, market strategist at IG Markets in Melbourne.

“The New Zealand dollar is looking at a short covering coming through with the market short on euros.”

Weston said the Italian government bill auction will be watched closely tonight, and “if we do see a rally coming through, the New Zealand dollar could reach 82.65 US cents”.

The rising yield on Spanish and Italian bonds rose bolstered demand for the perceived safety of US government debt.

The US Treasury sold US$32 billion of three-year notes, with the class of bidders that includes foreign central banks taking 40% of the debt, its largest share since August, according to Bloomberg News. The notes drew a yield of 0.427%.

The Federal Reserve’s Beige Book is due for release tomorrow in Washington DC, followed by a Michigan consumer confidence survey on Friday.

Markets are focused on a series of Fed speeches that will be scrutinised for any comment on the US labour market.

The speeches started on Monday with Fed chairman Ben Bernanke reinforcing his view the world’s largest economy hasn’t fully recovered from the global financial crisis, following weaker than expected employment data out last week.

The Statistics New Zealand accommodation survey for February and electronic card transactions for March are set for release tomorrow.

The New Zealand dollar was little changed at 62.38 euro cents from 62.45 cents yesterday and traded at 51.44 British pence at from 51.48 pence.

It slipped to 79.35 Australian cents from 79.54 cents and declined to 65.98 yen from 66.73 yen.

The trade weighted index decreased to 73.01 from 73.28.