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NZ dollar pares loss vs. euro on Italian election

NZ dollar pares loss vs. euro as investors mull make-up of Italian parliament

By Paul McBeth

Feb. 25 (BusinessDesk) - The New Zealand dollar pared losses against the euro in the local session as investors mull the make-up of Italy's Parliament in the first election since the global financial crisis saw the installation of technocrat executive.

The kiwi rose to 63.41 euro cents at 5pm in Wellington from 63.15 cents this morning, and little changed from 63.51 cents on Friday in New York. The currency was little changed at 83.63 US cents from 83.73 cents last week.

Frontrunner Pier Luigi Bersani of the Democratic Party, who has vowed to follow Prime Minister Mario Monti's austerity drive, may not be able to govern even if he gets a parliamentary majority as former Prime Minister Silvio Berlusconi and Beppe Grillo's 5-Star Movement siphon his support.

"The euro could have a bit of a comeback once the uncertainty of the election goes," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. "The kiwi could pull back a little bit" against the region's single currency.

New Zealand's currency continues to be supported by the real interest rates on offer, in a growing economy that's likely to see rising interest rates as soon as this year. A BusinessDesk survey of strategists leaned towards a weekly decline.

The kiwi rose to 81.37 Australian cents at 5pm in Wellington from 81.17 cents last week after the HSBC flash PMI showed a slower pace of manufacturing growth in China that expected. Australia is more heavily exposed to China's economy than New Zealand.

Investors are waiting for Federal Reserve chairman Ben Bernanke’s semi-annual update for US lawmakers on Tuesday and Wednesday. The testimony will be closely watched after minutes from the latest Fed meeting sparked concern the central bank might ease or end its stimulus measures sooner than expected.

The kiwi rose to 78.19 yen from 78.16 yen last week as investors prepare for the expected appointment of the next governor of the Bank of Japan.

The currency gained to 55.26 British pence from 55.08 pence last week after the UK had its AAA-rating cut by Moody's Investors Service to Aa1.

The trade-weighted index was little changed at 76.56 from 76.50 last week.

(BusinessDesk)

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