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NZ dollar hits 6-mth low, revives, as EU meets; budget looms

NZ dollar hits 6-month low, rebounds, on EU summit; budget looms

By Hannah Lynch

May 24 (BusinessDesk) - The New Zealand dollar climbed from a six-month low as European Union leaders meet amid talk Greece could leave the euro zone and ahead of the budget locally which is expected to chart the route back to fiscal surplus.

The New Zealand dollar fell as low as 74.54 US cents overnight, from 75.24 cents yesterday at 5pm. That's the lowest since Nov. 24. It recovered back to 75.15 cents just before 8am. The trade weighted index was little changed at 68.54 from 68.48.

Investors are awaiting the outcome of the European Union summit in Brussels, where speculation is mounting that Greece will leave the euro. The prospect of the indebted nation leaving the shared currency increased after it failed to form a government, following its May 6 elections. Fresh elections will now be held in June. Greece's main political parties remain opposed to the terms of the nation's second bailout fund from the European Union and the International Monetary Fund.

"People are squaring up prior to the meeting," said Stuart Ive, currency strategists at HiFX. "I don't think that the market is completely convinced that Greece will leave the euro but there is a massive fear factor out there."

New Zealand Finance Minister Bill English will deliver his fourth Budget this afternoon. English is expected to unveil a path towards getting the government’s books back into operating surplus in 2014/15, promising a second successive ‘zero’ budget.

"In New Zealand and Australia budget cuts are widely known before the budget," Ive said. "There are no real surprises in them - there will be no fireworks."

Overseas merchandise trade figures for April from Statistics New Zealand are also set for release this morning. Economist are expecting a monthly surplus of $500 million, according a Reuters survey.

In the world’s largest economy, housing data was better than expected for the second day running, helping firm up optimism the housing market is stabilising. New home sales figures rose 3.3 percent to 343,000 in April. Economists had expected 335,000 sales, according to a Bloomberg survey.

On Tuesday, existing homes sales rose 3.4 percent last month, according to the National Association of Realtors. That's the best annual sales pace since May 2010.

The New Zealand dollar to fell to 59.73 yen from 59.91 yen after the Bank of Japan left its asset-purchase fund unchanged after a better-than-expected 4.1 percent annualised increase in gross domestic product for the final three months of last year. The BOJ now regards asset purchases as its key monetary easing too.

New Zealand’s second-largest export market China, will release its HSBC flash purchasing manufacturing index, the nation’s unofficial measure of PMI today.

The New Zealand dollar was little changed on 79.60 Australian cents from 76.96 cents. It rose to 47.85 British pence from 47.79 pence and increased to 59.70 euro cents from 59.35 cents.

(BusinessDesk)

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