Global rally misses NZ dollar as Portuguese bonds attract buyers

by Paul McBeth

Jan. 13 (BusinessDesk) – The New Zealand dollar was little changed despite a global rally in investors’ appetite for riskier, higher-yielding assets after Portugal managed to sell government bonds.

Stocks in Europe climbed as investors were more optimistic about the region’s indebtedness after Portugal sold 1.25 billion euros worth of debt at a yield of 6.72%, below the 7% level regarded as unsustainable.

That prompted traders to seek bigger returns, and the Australian dollar, which has been punished in recent days over the Queensland floods, rebounded in line with gains in commodity prices.

The kiwi dollar didn’t follow its trans-Tasman counterpart higher as traders sold out of the currency and into the Australian dollar and the euro.

“A rebound in risk appetite was the major theme of the session, given the relatively successful Portuguese bond auction,” said Mike Jones, strategist at Bank of New Zealand.

“There was a relatively entrenched rally, but the kiwi was exempt – folk were a little wary of taking the kiwi much higher at the moment.”

The currency was little changed at 76.12 U.S. cents from 76.10 cents yesterday, and fell to 57.99 euro cents from 58.56 cents. It declined to 68.79 on the trade-weighted index of major trading partners’ currencies from 69.08 yesterday, and dropped to 76.49 Australian cents from 76.97 cents.

It was little changed at 63.16 yen from 63.20 yen yesterday, and decreased to 48.28 pence from 48.64 pence. Jones said the currency may trade between 75.90 U.S. cents and 76.50 cents today, with Australian employment data the major event for the day.

The ANZ Commodity Price Index will also be worth watching, with New Zealand likely to benefit from any lift in the price of raw materials, he said. New Zealand property valuation data from government-owned QV Valuations isn’t expected to have much impact on the kiwi today.

The housing market has been in the doldrums over the past year as households focus on repaying debt rather than ramping up spending, and was one of the factors that led to the Reserve Bank taking a breather in its tightening cycle.

The Federal Reserve’s so-called ‘beige book’ showed a pick-up in America’s labour market and an increase in manufacturing. The report, which collates anecdotal information about the various sectors across six regions, was slightly more optimistic in its tone than previous.

(BusinessDesk) 09:19:22

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