NZ dollar extends gains on euro as Europe debt auctions loom

NZ dollar extends gains on euro as Europe debt auctions loom

By Hannah Lynch

Jan. 16 (BusinessDesk) – The New Zealand dollar extended its gains against the euro through the local trading session ahead of France’s debt auction tonight and an investor stand-off following rating agency Standard & Poor’s downgrade of nine European nations.

The New Zealand dollar finished on 62.69 euro cents at 5pm, up from 62.61 cents just before 8am this morning. The kiwi was little changed on 79.26 US cents from 79.23 US cents.

The euro debt crisis took a fresh turn over the weekend with S&P downgrading the credit ratings of nine European nations, including powerhouse France, with policy initiatives taken by European leaders in past weeks viewed as insufficient in addressing the region’s debt woes. Germany now stands alone in the eurozone area with a stable AAA rating from S&P.

The downgrade places further pressure on France, which is first up in this week’s series of European debt auctions. France will auction as much as 8.7 billion euros in bills, followed by the European Financial Stability Facility’s 1.5 billion euro bond sale and Greece’s offering of bills tomorrow. Spain will also offer debt tomorrow and Jan.19, while Portugal will sell bills on Jan. 18.

“Markets will be watching the debt auctions,” said Jane Turner, economist at ASB Institutional. “We saw quite strong demand (at the debt auction) last week so it will be interesting to see if that demand is still there.”

“The kiwi has continued to lift strongly over the weekend and we see it continuing to track that way against the euro,” Turner said.

The first significant set of New Zealand data for 2012 is released this week, with the Consumer Price Index on Thursday. ASB is predicting a subdued 0.2 percent in the fourth quarter, reflecting lower food prices and a high New Zealand dollar. This comes a week before the Reserve Bank of New Zealand’s January official cash rate review, which is widely expected to signal no change at 2.5 percent.

US markets are closed Monday for the Martin Luther King Day public holiday.

The kiwi fell to 77.06 Australian cents from 76.89 cents. It gained to 60.97 yen from 60.68 and was little changed on 51.79 British pence from 51.74.

The trade-weighted index rose to 71.23 from 71.13.

(BusinessDesk)

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