NZ dollar falls ahead of ECB lending, after mixed US data

Wednesday 29th February 2012

The New Zealand dollar fell ahead of the European Central Bank second round of lending, business confidence at home and after mixed US economic figures.

The New Zealand dollar fell to 83.49 US cents at 8am from 83.96 cents at 5pm in Wellington yesterday. The trade-weighted index dropped to 73.36 from 73.73.

US durable goods orders and home prices fell more than expected, while American consumer confidence rose, painting a mixed picture of recovery in the world’s biggest economy. New Zealand business confidence and building consents are due out today.

Globally investors are awaiting the ECB’s offer of cheap cash, seen at around half a trillion euros, to that region’s lenders. The ECB’s second tranche of lending may stimulate Europe’s economy, lifting prospects for global growth and growth-linked assets such as the kiwi.

“The long wait for the results of the ECB’s long-term refinancing operation continue for the New Zealand dollar, with the third failed attempt to break above 84.20,” said Alex Sinton, senior dealer at ANZ New Zealand.

The Dow Jones Industrial Average rose 0.2 percent and the Standard & Poor's 500 Index gained 0.3 percent as consumer confidence in the world’s largest economy, the US, rose to a one-year high.

Keeping a lid on the gains were worse-than-expected declines in durable goods orders and home prices. Durable goods orders slid 4 percent last month, the largest drop since January 2009. The S&P/Case-Shiller index of property values in 20 cities fell 4 percent from a year earlier, after dropping 3.9 percent in November.

Adding to the mix, the Energy Department will release data on US crude supplies tomorrow. It is expected to show oil reserves rose to the highest level in five months last week, according to the median of analyst responses in a Bloomberg survey.

In Europe, the Netherlands and Finnish parliaments are preparing to vote on whether to approve Greece’s 130 billion bailout package. Ireland’s government ministers will also hold a referendum to ratify the European fiscal compact, with such a vote effectively showing its commitment to the euro.

In New Zealand, traders will be looking at January building consents today for any signs of pick-up in construction intentions, and also the National Bank Business Outlook for any hint on how confident local firms are.

The New Zealand dollar fell to 62.09 euro cents from 62.50 cents yesterday at 5pm. The kiwi dropped to 52.61 British pence from 52.99 pence and 77.71 Australian cents from 77.98 cents. It was little-changed on 67.22 yen from 67.30 yen.

BusinessDesk.co.nz

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