NZ dollar holds above 70.50 US cents as Greek outlook deteriorates

Friday 9th April 2010

The New Zealand dollar held above 70.50 US cents amid a deteriorating outlook for debt-stricken Greece, which sapped investors’ appetite for higher yields and pushed European stock markets lower.

French, German and English equity markets declined amid news European and American banks had cut their funding to Greek banks, while National Bank of Greece, the country’s biggest bank, was downgraded from a ‘buy’ to 'reduce' by Natixis Securities.

Investor nerves about the state of the Mediterranean economies prompted European Central Bank President Jean Claude Trichet to talk down the possibility of a Greek default in a bid to shore up sentiment.

“Greece does seem to be deteriorating – there were early reports that it wasn’t happy with the rescue package, and there’s news of an exodus of European and US banks that have cut their funding lines to Greece,” said Mike Jones, strategist at Bank of New Zealand.

“The kiwi’s been chopped around in the latest lot of gyrations in risk appetite.”

The kiwi rose to 70.61 US cents from 70.23 cents yesterday, and increased to 65.69 on the trade-weighted index, or TWI, from 65.41. It jumped to 65.90 yen from 65.19 yen yesterday, and edged up to 76.06 Australian cents from 75.94 cents.

It gained to 52.86 euro cents from 52.73 cents yesterday, advanced to 46.24 pence from 46.11 pence. Jones said the currency may trade between 70 US cents and 71.10 cents today, and with little data on the horizon, all eyes will be back on Greece over the weekend.

US Treasury Secretary Timothy Geithner meets with Chinese officials over the next few days, and there’s growing speculation China will revalue the yuan.

If the world’s third largest economy moves on its currency, the kiwi and Australian dollar will probably gain, Jones said. Jones said the kiwi will probably test the top of its 70 US cents to 71.50 cents range next week, though the trans-Tasman cross-rate will need to improve before it can go higher.

Businesswire.co.nz

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