NZ dollar may fall amid speculation Spain, Greece will tap bailout fund

Monday 24th September 2012

The New Zealand dollar may fall amid speculation Spain will ask for a full bailout this week, while debt-stricken Greece is still to reach an agreement with its regional lenders to get its next tranche of funds.

The New Zealand dollar traded at 82.88 US cents just before 8am little changed from 82.78 cents at the close of trading in New York on Friday. The trade weighted index declined to 73.21 from 73.48 last week.

Investors' fears about the pace of global growth have reemerged amid growing speculation Spain will seek a bailout package in the coming days. At the same time Greece, Spain's indebted neighbour, is yet to reach an agreement with international lenders to access about 12 billion euros of additional assistance of its 130 billion euro package.

"Fears are creeping back into the market about Spain," said Stuart Ive, currency strategist at HiFX. "The continuing issues about Spain and Greece are not going away - there will be a bit of a risk-off scenario initially" which will sap demand for currencies such as the kiwi, he said.

The New Zealand dollar is likely to trade in a range of 82 US cents to 83.40 cents this week, Ive said.

"We have been trading in this band since Sept. 14 and unless there is a major event we will remain in this band - finishing in the lower end of the band at the end of the week," he said.

Traders will be looking to Monday's German IFO confidence survey to boost sentiment after last week's soft European manufacturing data stoked concern the region's economy may be slowing.

There is no significant New Zealand data set for release today.

The New Zealand dollar rose to 63.91 euro cents from 63.78 cents at the close of trading in New York. The kiwi climbed to 79.34 Australian cents from 79.11 and increased to 51.07 British pence from 50.99 pence. The kiwi was little changed at 64.78 yen from 64.79 yen last week.

BusinessDesk.co.nz

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