NZ dollar pares loss as investors get jumpy over Europe

NZ dollar pares loss as investors get jumpy over Europe's future

By Paul McBeth

June 12 (BusinessDesk) - The New Zealand dollar pared its losses in local trading as investors remained nervous about the future of Europe after the bail out the Spanish banking sector, and as Greece prepares to go back to the polls this weekend.

The kiwi traded at 77.08 US cents from 76.87 cents at 8am, and was down from 77.65 cents yesterday. The trade weighted index was little changed at 70.41 from 70.48 yesterday.

Asian stock markets followed Wall Street lower amid doubts the Spanish banking bailout will be enough to insulate Europe from a complete meltdown, with Greece's second general election coming up at the end of the week. Japan's Nikkei 225 index fell 0.9 percent, Hong Kong's Hang Seng declined 0.6 percent, and China's Shanghai Composite index decreased 0.8 percent.

"Even though there are some pretty significant things with the Reserve Bank of New Zealand meeting and (Reserve Bank of Australia Governor Glenn) Stevens speaking at a reasonably high profile forum, we're back to watching Europe," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney.

"The logical thing with such a great amount of uncertainty is for a firmer US dollar and Japanese yen," which investors typically use as 'safe haven' assets, and will probably keep a lid on the kiwi dollar this week, he said.

New Zealand's central bank Governor Alan Bollard will likely keep the official cash rate on hold at 2.5 percent when he reviews monetary policy on Thursday. Markets will be looking for anything he says about the currency, which he has previously said was too strong for the country to keep the current account at a sustainable level.

The RBA's Stevens will deliver a speech at an Australian Federal Government meeting with business executives. Prime Minister Julia Gillard and Treasurer Wayne Swan have been complaining about the strength of the Australian dollar, which has appreciated 73 percent against the greenback in the past decade, driven by demand for the nation's raw materials. The Australian dollar fell to 98.99 US cents from 99.75 cents yesterday.

The New Zealand dollar was little changed at 77.90 Australian cents from 77.81 yesterday, and fell to 61.41 yen from 61.83 yen. It gained to 61.78 euro cents from 61.45 cents yesterday, and fell to 49.75 pence from 49.90 pence.

(BusinessDesk)

© Scoop Media