NZ dollar rises on election, report of Italy bailout

NZ dollar rises to 10-day high on election outcome, talk of IMF bail-out for Italy

By Paul McBeth

Nov. 28 (BusinessDesk) – The New Zealand dollar rose to a 10-day high after a report that the International Monetary Fund will bail-out Italy, while at home, the incumbent National Party secured a convincing victory in Saturday’s general election.

The kiwi climbed as high as 75.53, the highest since Nov. 10, from 74.55 cents at 8am. It traded at 74.98 cents at 5pm, up from 74.18 cents on Friday in New York.

Investors’ appetite for higher-yielding, or riskier, assets was bolstered by rumours the IMF is preparing a 600 billion euro loan to help balance Italy’s fiscal deficit. That would give new Italian Prime Minister Mario Monti up to a year and a half to implement budget cuts without having to refinance the nation’s debt. The Mediterranean nation has to raise 370 billion euros, the equivalent of about a quarter of Italy’s gross domestic product, throughout 2012 to meet existing debt repayments and the increased cost of funding.

“The IMF has more strength to police the conditions of these things, and is not considered European, so it’s more objective to assess countries,” said Imre Speizer, market strategist at Westpac Banking. “That’s got the markets excited all day, but I wouldn’t expect to see the effects lasting all week,” which should see the kiwi shed its gains, he said.

The National Party’s electoral win on Saturday underpinned gains in the kiwi dollar, with incumbent Prime Minister John Key securing 60 of the 121 seats in Parliament with almost 48 percent of the vote. Key today held negotiations with leaders of support partners Act New Zealand and United Future, and potential partner the Maori Party.

The National Bank Business Outlook showed local businesses were more upbeat about the economy’s prospects than in October, arresting a three-month decline, as companies shook off fears over the global volatility.

The kiwi dollar fell to 76.23 Australian cents from 76.48 on Friday, and rose to 58.25 yen from 57.35 yen. It gained to 56.44 euro cents from 55.68 cents last week, and advanced to 48.38 pence from 47.95 pence on Friday.

The trade weighted index climbed to 67.16 from 66.49 on Friday in New York.

(BusinessDesk)

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