NZ dollar poised to gain as markets digest EU deal

NZ dollar poised to gain as markets take a breather after EU deal

By Paul McBeth

Dec. 12 (BusinessDesk) – The New Zealand dollar is poised to get a short-term boost from the weekend deal in Europe, where the region’s leaders put a plan in place to deal with ballooning debt, giving the markets time for a breather as they digest the agreement.

The kiwi dollar was little changed at 77.20 US cents at 5pm from 77.27 cents just after 8am, and up from 76.72 cents in late New York trading on Friday.

New Zealand’s currency climbed as much as 1.4 percent after the leaders of the European Union agreed to a deal championed by France and Germany to implement tighter fiscal controls in return for a 200 billion euro injection into the region’s war-chest. The deal was part of an effort to soothe global investors’ fears the Eurozone faced a debt crisis which could send the world into another economic downturn.

Even though the UK spurned the agreement, it should help allay concerns about the global economy, which should be a short-term boost for risk-sensitive assets such as the kiwi dollar, foreign exchange market observers say.

“The kiwi might go up to 80 (US cents), but no higher than that,” said Imre Speizer, market strategist at Westpac Banking. Since the weekend, “the kiwi pulled back, but it was a consolidation rather than a sell off.”

The currency may fall this week according to a BusinessDesk survey of six analysts, as markets wait for rating agency Standard & Poor’s response to the EU deal. S&P put 15 euro-zone members on notice of a likely downgrade, including triple-A rated powerhouses France and Germany, over the region’s growing indebtedness.

However, a gloomier forecast for New Zealand’s economic growth in a New Zealand Institute of Economic Research survey of financial institutions dimmed the currency’s appeal, with economists picking slower expansion in the next two years than they had in a September survey. The NZIER report said the respondents put their more pessimistic outlook down to the weaker global outlook and a slower rebuild flagged for Canterbury.

The kiwi dollar was little changed at 75.81 Australian cents from 75.88 on Friday, and rose to to 59.92 yen from 59.56 yen last week. It gained to 57.82 euro cents from 57.59 cents on Friday in New York and rose to 49.32 British pence from 49.13 pence.

The trade weighted index was up 68.47 from 68.17 at 5pm on Friday.

(BusinessDesk)

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