NZ dollar rises after Italy's Monti says Greece likely to keep euro, Wall Street gains
By Hannah Lynch
May 25 (BusinessDesk) - The New Zealand dollar gained after Italian Prime Minister Mario Monti said Greece will probably keep the euro, easing concerns about the fragility of Europe and stoking investors' appetite for higher-yielding, riskier, assets.
The kiwi rose to 75.32 US cents at 8am from 75.09 cents yesterday at 5pm. The trade weighted index was little changed at 68.57 from 68.51.
Stocks on Wall Street rallied after Italy's Monti backed the likelihood of Greece staying in the euro-zone. "Anything can happen, but I think the most probable outcome is the one which is most positive for Greece and for all of us," Monti said in a TV interview. The Dow Jones Industrial Average rose 0.3 percent to 12,529.75. European Union leaders yesterday concluded their summit in Brussels and affirmed their support for Greece, even as Germany continued to oppose the joint issue of common bonds.
"What the European Union has been consistently poor at displaying to the market is what its plans are and how they are going to do it," said Stuart Ive, currency strategist at HiFX. "There is always a catch because it still remains unclear about what growth pack they are talking about - the actual contents of that pack won't be disclosed until after the Greek elections."
Greece will hold a second election on June 17 after coalition talks failed following its May 6 elections.
Monti's comment came after figures showed manufacturing shrank across Europe, German business confidence dimmed, and the UK economy shrank a bigger-than-expected 0.3 percent in the first three months of the year.
"The economic data just proves the world's economy is slowing down and any recovery is fragile," Ive said.
The New Zealand dollar showed little changed yesterday after Finance Minister Bill English announced his fourth budget. The National government's 'zero' budget plans to get the nation's books back in the black by 2015.
"The market reaction was fairly muted, the main reaction came from the rating agencies," Ive said.
Rating agency S&P affirmed New Zealand's AA foreign currency rating, and kept the outlook on stable, saying the budget is the “latest incremental step toward consolidating the government’s fiscal settings after four years of deficits” from the country’s recession and costs relating to the Canterbury earthquakes.
There is no significant data set for release in New Zealand today.
The New Zealand dollar rose to 60 euro cents from 59.73 cents yesterday and increased to 48 British pence from 47.90. The kiwi increased to 59.91 yen from 58.73 yen and was unchanged on 77.08 Australian cents.