NZ dollar holds vs. euro and greenback as Europe

By Hannah Lynch

Jan. 18 (BusinessDesk) – The New Zealand dollar held its near-record highs against the euro and two month gains against the greenback after a record jump in German investor confidence and demand for European bond sales continued.

The New Zealand dollar was at 62.65 euro cents just before 8.30 a.m., down from 62.72 cents yesterday. The kiwi was trading at 79.36 US cents, down from 79.45 cents.

While still deeply negative, German investor confidence unexpectedly rose in December to minus 21.6 from minus 53.8 the month before, according to the ZEW Center for European Economic Research. The gain is the biggest since the ZEW started the index in December 1991. A Bloomberg survey had forecast a more modest improvement to a negative reading of 49.4.

“The German data was better than expected and that is really what saw the currencies rally,” said Tim Kelleher, head of institutional FX sales NZ ASB Institutional, who said the New Zealand dollar was still being seen as “safe haven buying”.

“It is following on with the status quo – a path of less resistance.”

Investors continued to ignore rating agency Standard & Poor’s mass European downgrades last week, and the European Financial Stability Fund on Monday. The euro-bailout fund had its rating cut to AA+ along with powerhouse France. Spain sold 12-month bills at an average yield of 2.05 percent last night, down from 4.05 percent at its previous action on Dec. 13.

The EFSF also sold 1.5 billion euros worth of six-month bills at an average yield of 0.26 percent and Greece sold 1.63 billion euro of 13-week Treasury bills at a yield of 4.64 percent, with short-maturity debt now the only source of market financing available for the nation.

Talks are set to resume today between Greece’s Prime Minister Lucas Papademos and Greek bondholders on refinancing of the nation’s debt after they stalled five days ago.

It is a data-heavy day in the US with industrial production, producer price index and capacity production statistics for December all set for release.

In New Zealand, the latest Fonterra milk auction showed a 1.5 percent increase in the average price this morning, recovering most of its lost ground in the previous two auctions. The first significant set of New Zealand data for 2012 is due out tomorrow, with the Consumer’s Price Index. The CPI comes a week before the Reserve Bank of New Zealand’s January official cash rate review, which is widely expected to signal no change at 2.5 percent.

The New Zealand dollar was little changed at 77.04 Australian cents from 77.02. It rose to 61.36 yen from 60.94 yen and 52.11 British Pence from 51.85 Pence.

The trade-weighted index rose to 71.40 from 71.16.

(BusinessDesk)

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