NZ dollar gains vs. euro as investors digest election results

Tuesday 8th May 2012

The New Zealand dollar rose against the euro as investors digested the implications of leadership changes in France and Greece which may herald less support for Europe's austerity measures.

The New Zealand dollar rose to 61.82 euro cents from 61.06 cents yesterday. The kiwi rose to 79.44 US cents, having earlier reached its lowest level since Jan. 13 at 79.09, and was up from 79.20 yesterday. The trade weighted index decreased to 70.99 from 71.03.

Stock markets were mixed as investors pondered what impact the new Greek and French governments will have on the Euro-zone's austerity drive. In the US, the Dow Jones Industrial Average fell 0.2 percent, France's CAC 40 index rose 1.7 percent, and Germany's DAX 30 index increased 0.1 percent.

France's successful presidential challenger Francois Hollande won about 52 percent of the vote, defeating the incumbent Nicolas Sarkozy. Hollande's platform includes increased spending and slower cuts to the budget deficit, which has sparked concerns the Euro-zone may need to refinance its debt programme.

The kiwi "is in a consolidation phase at the moment - short-term it could climb back up to the 61.40 euro cent area - on the day it will probably be flat," said Alex Sinton, senior dealer at ANZ New Zealand. "The exporters of yesterday and the buyers of yesterday will be supportive and the New Zealand dollar will squeeze up a little bit higher."

Official projections in Greece show New Democracy and Socialist Pasok, the two parties that helped secure the country's second multi-billion euro rescue package, will fall one short of the 151 seat majority needed to rule after the neo-Nazi Golden Dawn party secured 6.9 percent of the vote. The mandate to form a government now moves to the second-ranked Syriza party.

The New Zealand dollar rose to 77.87 Australian cents from 78.21 cents yesterday as Australia's Federal government prepares to release it budget this evening at about 9.30pm New Zealand time. Australian Treasurer Wayne Swan has pledged to deliver a A$1.5 billion surplus this year and a A$2 billion surplus next year.

"It is not going to be any different from ours, in other words it will be tight," Sinton said.

New Zealand's financial statements for the nine months ended March 31 will be released by the government this morning.

The New Zealand dollar was little changed at 49.08 British pence from 49.10 pence. The kiwi rose to 63.49 yen from 63.19 yen.

BusinessDesk.co.nz

Comments from our readers

No comments yet