NZ dollar holds above 75 US cts as ECB buys sovereign debt
NZ dollar holds above 75 US cts as ECB buys Portuguese, Irish bonds
By Paul McBeth
Dec. 3 (BusinessDesk) – The New Zealand dollar held above 75 U.S. cents after fears European policy makers weren’t doing enough to quell sovereign debt problems were eased by reports the central bank was buying Portuguese and Irish government bonds.
The European Central Bank ramped up its bond buying activity last week, purchasing the most securities in two months, though at 67 billion euros, still lags behind its English and American counterparts. That helped boosted investors’ appetite for higher-yielding, or riskier, assets, which had taken a dent earlier when ECB President Jean-Claude Trichet didn’t announce an aggressive plan to deal with the sovereign debt crisis in the bank’s monetary policy review. Stocks in Europe and on Wall Street gained amid the upbeat mood, helping buoy risk-sensitive currencies such as the kiwi dollar.
“Currencies are getting tossed around at the moment and fundamentals are taking a back seat with the risk-on, risk-off type of volatility creeping back into play,” said Mike Jones, strategist at Bank of New Zealand. “With little evidence of strength in the kiwi economy, ongoing risk aversion on the back of Europe’s problems and firming U.S. bond yields, the kiwi’s probably going lower for the rest of the year.”
The kiwi was little changed at 75.40 U.S. cents from 75.37 cents yesterday, and fell to 68.48 on the trade-weighted index of major trading partners’ currencies from 68.66. It dropped to 63.19 yen from 63.39 yen yesterday, and declined to 77.28 Australian cents from 77.83 cents. It retreated to 57.13 euro cents from 57.37 cents yesterday, and gained to 48.37 pence from 48.22 pence.
Jones said the currency may trade between 75.10 U.S. cents and 75.90 cents today as it waits on American employment data out on Friday in the U.S. The kiwi is at the top end of BNZ’s fair-value range of between 73.50 cents and 75 cents, and Jones says it will probably head towards the bottom of the range in the coming weeks.
Philadelphia Federal Reserve President Charles Plosser told a New York audience the central bank’s second round of asset purchases will make it more difficult to unwind stimulus in the future. He said if the Fed doesn’t “act aggressively and promptly” it may cause “substantial inflation.”
(BusinessDesk)