BusinessDesk: NZ dollar joins Wall Street rally ahead of weekend summit

BusinessDesk: NZ dollar joins Wall Street rally ahead of weekend summit

The New Zealand dollar rose about three-quarters of a US cent in volatile early trading as investors continue to assess if Europe's leaders will come up with a credible solution to the region's financial crisis at a summit at the weekend.

The kiwi dollar rose to 79.47 US cents at 8am from 78.93 cents at 5pm yesterday, and was up from 78.75 cents at 5am.

"It is an incredibly volatile morning watching headlines," said Alex Sinton, senior dealer at ANZ New Zealand.

United States equity markets ultimately sent out a positive signal, with the Dow Jones Industrial Average up 0.5 percent as the New Zealand day geared up, having recovered earlier losses.

That came after violence flared on the streets of Athens as the Greek parliament gave its final approval of the latest package of austerity measures, according to BBC reports.

Investors are preparing for the EU summit at the weekend, and expectations are mixed. Bloomberg reported that European governments may unleash as much as 940 million euro to fight the European debt crisis by combining the temporary and planned permanent rescue funds, citing people familiar with the discussions. Meanwhile Reuters reported there are deep divisions between France and Germany ahead of the summit.

Germany's chancellor Angela Merkel is reported to have cancelled a speech to work on resolving a deadlock over how to leverage the European Financial Stability Fund.

"The New Zealand dollar is really in the 79 US cent zone and people are continuing to watch headlines," Sinton said.

New Zealand migration data for September today is not expected to influence the currency market.

Sinton said that after the final of the Rugby World Cup on Sunday people will focus on the Nov. 26 election.

"The uncertainty of running into an election and about what is happening in Europe could provide for more volatile trading," he said.

Europe’s woes have been overshadowing upbeat economic data on the other side of the Atlantic, and there’s growing speculation the US economy may avoid another downturn, just after its credit rating was unexpectedly cut by Standard & Poor’s.

New Zealand’s Reserve Bank will review the official cash rate next week, and is expected to keep rates on hold at a record-low 2.5 percent, as Governor Alan Bollard holds the line amid the current global unrest.

Traders are betting Bollard will hike the benchmark interest rate by 33 basis points over the coming 12 months, according to the Overnight Index Swap curve.

The New Zealand dollar was unchanged from yesterday at 77.44 Australian cents. It rose to 61.05 yen from 60.59 yen yesterday and to 57.68 euro cents from 57.52 cents.

It rose to 50.32 British pence from 50.17 pence yesterday.

The trade-weighted index was at 69.62 from 69.32 yesterday.


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