NZ dollar falls as Greece fails to close debt deal

Tuesday 31st January 2012

The New Zealand dollar fell against the greenback on renewed concerns European Union leaders won’t resolve the region’s debt crisis at a summit in Brussels and talks continue between Greece and holders of its bonds.

The New Zealand dollar was at 81.96 US cents just after 8.30 a.m. down from 82.10 cents yesterday at 5pm.

EU leaders made little progress at a summit in Brussels where they had aimed to complete German-led austerity measures and endorse a 500 billion euro rescue fund. At the same time, Greek policymakers are no closer to cutting a deal with private bondholders. Holders of Greek government bonds had signaled they were prepared to accept an average coupon of 3.6 percent on new 30-year bonds, down from 4.25 percent previously.

“If policymakers don’t come to a decision we will see the kiwi come under pressure,” said Dan Bell, currency strategist at HiFX. “The New Zealand dollar tested recent highs and then came off yesterday afternoon after concerns about the Greek discussions.

“The Europe debt issue had gone away in the first weeks of the year, no news was good news but now we continue to see tension,” he said.

Italy raised less than its maximum target at a bond sale after Fitch Ratings cut its rating along with Spain, Belgium, Slovenia and Cyprus on Friday, saying they lack financial flexibility in the face of the regional debt crisis. The Rome-based Treasury sold 7.5 billion euros of debt due between 2016 and 2022, less than its maximum target of 8 billion euros.

In Portugal, borrowing costs soared amid concerns that the nation’s bondholders will be forced to take a haircut. Portuguese credit default swaps rose to a new high indicating a 71 percent chance of default.

Traders will be watching US data this week, including manufacturing figures and non-farm payrolls on Friday to assess whether the world’s biggest economy is recovering from the global downturn of the past few years.

In New Zealand, the National Employment Indicator for October, Reserve Bank credit aggregates and Statistics New Zealand’s building consents for December are all set for release today.

The kiwi was down to 77.38 from 77.43 Australian cents yesterday at 5pm. It advanced to 62.47 euro cents from 62.68 cents and gained to 62.55 yen from 62.25 yen. It was little-changed on 52.25 British pence from 52.24.

The trade-weighted index was little-changed on 72.19 from 72.21 yesterday.

(BusinessDesk)

BusinessDesk.co.nz

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