NZ dollar holds near five-month high on Greek aid optimism

Tuesday 21st February 2012

The New Zealand dollar held near its five-month high against the greenback on optimism euro-zone finance ministers will agree on a second financial rescue package for Greece.

The New Zealand dollar rose as high as 84.16 US cents overnight and traded at 83.88 cents at 8am down from 84.12 cents yesterday at 5pm.

Finance ministers from the 17 euro-zone nations are currently meeting in Brussels to discuss the Greek bailout deal. It is widely expected they will approve the 130 billion euros in aid the Mediterranean needs to avoid default. Should European Union finance minister fail to agree the issue may be delayed until the next EU summit on March 1. Talks were delayed after ministers demanded more assurances Greece was doing enough to secure the extra cuts needed to reduce its spending by 325 million euros.

“Optimism a Greek deal could be just around the corner kept investors’ risk appetite underpinned,” said Mike Jones, market strategist at Bank of New Zealand. “Should a second bailout deal be announced today, expect risk-sensitive assets like the New Zealand dollar to outperform.”

Investors also responded positively to China’s moves to increase liquidity at its banks. China, New Zealand’s second largest market after Australia, cut reserve requirements for its banks, helping to push the kiwi to a six and a half month high against the yen.

The New Zealand dollar held near its six-month high on 66.76 yen at 8am, down slightly from 67.29 yen yesterday at 5pm.

In the US, financial markets are closed on Monday for the Presidents Day holiday.

In Australia, the Reserve Bank will release the minutes from its Feb. 7 meeting this afternoon, after it unexpectedly kept its benchmark interest rate on hold at 4.25 percent.

In New Zealand, the Reserve Bank’s survey of household inflation expectations for the March quarter will be released this morning, along with the National Bank regional trends survey this afternoon.

The New Zealand dollar slipped to 63.36 euro cents just after 8am from 63.66 cents yesterday at 5pm. It was little-changed on 52.92 British pence from 52.98 pence. The kiwi rose to 78.01 Australian cents from 77.78 cents yesterday.

The trade-weighted index fell to 73.83 from 74.08.

(BusinessDesk)

BusinessDesk.co.nz

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