Dollar halts slide as US corporate earnings gather steam

By Paul McBeth

Thursday 9th April 2009

The New Zealand dollar halted its slide as the US corporate earnings season begins to gather steam and shares on Wall Street edged higher.

Bed Bath and Beyond, the largest US home furnishings retailer, rose 24% as its profit fell less than expected, helping nudge the Standard and Poor's 500 Index up 1.2%. Alcoa, the largest aluminium company in the US and first on the Dow Jones Industrial Average to report its results, posted a first-quarter loss US$497. It rose 3.5% on the Dow, erasing the previous day's fall.

"Earnings will be the watershed - either it will reinforce the rally or things are not quite as rosy, and we may see a turn again," said Philip Borkin, economist at ANZ National Bank. It's too difficult to predict whether the earnings season will be the catalyst to drive the kiwi down, but "it will eventually come off," he said.

The kiwi rose to 57.75 US cents from 57.35 cents yesterday, and increased to 57.75 yen from 57.25. It gained to 81.43 Australian cents from 81.20 cents yesterday, and climbed to 43.55 euro cents from 43.44 cents.

Borkin said the kiwi may trade between 57.10 US cents and 58.50 cents today.

The New Zealand and Australian currencies may fall versus the US currency if Australian employment data out this today is weaker than expected. Economists predict that 25,000 more Australians will join the dole queue, lifting unemployment to 5.4%, according to a Reuters survey.

"Should this data disappoint, we could well see New Zealand/Australian dollar cross move back towards 0.8250 as investors are squeezed out of short positions," said Danica Hampton, currency strategist at Bank of New Zealand.

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