Kiwi gets a lift

Friday 30th December 2011

The New Zealand dollar rose as signs of recovery in the US economy helped lift equity markets, helping offset ongoing fears over Europe’s debt crisis that forced Italy to accept a yield of almost 7 percent to sell 10-year bonds.

The New Zealand dollar traded at 77.04 US cents from 76.92 cents in late trading yesterday.The trade-weighted index was at 69.07 from 69.01 yesterday.

US Labor Department figures showed the number of Americans applying for unemployment benefits fell to the lowest level since June 2008, while pending home sales rose to the highest since April 2010 and a measure of business sentiment fell less than expected. Italy sold 7 billion euros of bonds, less than the 8.5 billion euros it had targeted, though at lower yields than in last month’s auction.

The US data “was enough to see the kiwi come off its lows,” said HiFX senior trader Stuart Ive. “The market is still very, very cautious about the situation in Europe. We’re going to see a lot more volatility as we go into the New Year until the sovereign debt issue in Europe comes to some sort of conclusion.”

The New Zealand dollar may trade in a range of 76.60 US cents and 77.40 cents today, he said.

The kiwi dollar rose to as high as 88.40 US cents on Aug. 1 as US lawmakers argued over lifting the federal debt ceiling though as it heads into the last day of trading for 2011 it is about 0.4 percent below where it started the year. That marks the first declining year in three after the currency climbed back from its global financial crisis lows through 2009 and 2010.

HiFX’s Ive said the kiwi dollar may weaken into 2012 “if risks in Europe continue to dominate.” Some of the region’s smaller economies are already believed to be in recession with more to follow.

Against that, “the US economy is picking itself up,” he said. The New Zealand dollar may begin to separate from swings in the euro as its fortunes are more tied to the export markets of Australia and Asia.

The kiwi dollar rose to 59.51 euro cents from 59.46 cents and was little changed at 59.81 yen from 59.79 yen yesterday. It climbed to 50.03 British pence from 49.77 pence and slipped to 76.06 Australian cents from 69.01 cents.

BusinessDesk.co.nz

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