Dollar holds above 64 US cents

Monday 20th July 2009

The New Zealand dollar held above 64 US cents as better-than-expected US earnings stoked optimism the worst of the global recession may be over, and propped up investors’ appetite for higher-yielding, or riskier assets.

Goldman Sachs Group, Intel Corp. and IBM all posted better-than-expected results for the three months ended June 30, bolstering risk appetites as the global economic outlook improves. The Chicago Board Options Exchange’s Volatility Index, or VIX, a measure of volatility on the Standard & Poor’s 500 index, fell 1.2% to 24.34, the lowest reading since the week leading up to the collapse of Lehman Brothers. Wall Street rounded out its biggest gain in four months as the Dow Jones Industrial Average climbed 7.3% last week.

“Earnings season is the major focus at present, and at the margins has been better than expectations,” said Phil Borkin, economist at ANZ National Bank. “The kiwi is really range trading and looking for movement in equities.”

The kiwi dollar slipped to 64.37 US cents from 64.43 cents last week, and was little changed at 60.63 on the trade-weighted index, or TWI, a measure of the currency versus a basket of five major trading partners, from 60.62. It gained to 60.67 yen from 60.42 yen last week, and declined to 45.63 euro cents from 45.67 cents. It was little changed at 80.39 Australian cents from 80.40 cents last week.

Borkin said the currency may trade between 63.90 US cents and 64.80 US cents today as it continues to track equity markets, with a key support level at 63.80 cents.

“The VIX is at relatively low levels, and people are more optimistic the worst has past,” he said.

CIT Group as reportedly reached a deal with key bondholders for some US$3 billion in financing that will help the 101-year-old lender stave off bankruptcy, according to the Wall Street Journal. The company’s shares soared 71% to 70 US cents on reports it was negotiating with bankers including Goldman Sachs and JPMorgan Chase, and the confirmation may underpin further optimism in the markets.

Businesswire.co.nz

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