NZ dollar pares losses as Obama's healthcare plan stokes risk appetite

Tuesday 23rd March 2010

The New Zealand dollar pared its losses as US President Barack Obama’s healthcare plan stoked investors’ appetite for higher yielding, or riskier, assets after Congress passed the legislation and gave a vote of confidence to administration.

Stocks on Wall Street gained after Obama’s healthcare plan was passed by 219 votes to 212 in the House of Representatives, with the Dow Jones Industrial Average up 0.5% to 10792.54. The legislation, which will cover 32 million Americans without health insurance at a cost of US$940 billion over the next decade, has dragged on since Obama took office last year, and the vote has bolstered support for the President. Before Wall Street opened, investors eschewed risky assets amid further reports of strained relations between the US and China over the yuan’s valuation.

Wall Street’s “health sector boost plus general confidence politically supported the market,” said Imre Speizer, markets strategist at Westpac Banking Corp. “Risk currencies went along with the trades, though commodities did not, and Treasuries did not,” he said, referring to the asset classes that gained.

The kiwi pared its loss to 70.48 US cents from 70.66 cents yesterday, and dropped to 65.21 on the trade-weighted index, or TWI, a measure of the currency against a basket of five trading partners, from 65.45. It declined to 63.55 yen from 63.95 yen yesterday, and shrank to 76.86 Australian cents from 77.35 cents. It edged lower to 52.03 euro cents from 52.16 cents yesterday, and slipped to 46.71 pence from 47.07 pence.

Speizer said the currency may trade between 70 US cents and 71 cents today with more pressure on the downside, though he doesn’t expect it to break with the upcoming fourth-quarter current account and gross domestic product data releases in the next couple of days likely to support the kiwi.

Earlier in the trading session, risk aversion reared up after German Chancellor Angela Merkel said the European Summit this week probably won’t offer a resolution on Greece’s fiscal woes. This was later soothed European Central Bank President Jean Claude Trichet who said it was legally impossible for the Mediterranean nation to leave the Euro-zone.

Businesswire.co.nz

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