NZ dollar pares gain from month-high

NZ dollar pares gain from month-high amid concerns over European lenders

By Paul McBeth

Sept. 10 (BusinessDesk) – The New Zealand dollar pared its gain from a month-high amid concerns European banks may struggle to meet new capital requirements to be discussed at Basel III this weekend.

Central bankers and banking supervisors meet in Switzerland this weekend and are expected to set minimum requirements for the amount of top quality capital banks have to hold against future losses. Though there’s some speculation the accord might not be a onerous as first thought, fears the July stress tests of lenders weren’t tough enough and talk from German officials that the country’s banks might struggle to meet the requirements put investors on the back-foot late in the New York session, wiping earlier gains in riskier, or higher-yielding, assets. The kiwi dollar climbed above 72.80 U.S. cents after it surged on the coat-tails of its Australian counterpart after strong employment data across the Tasman.

“The gloss was taken off (risk assets) by the ongoing talk that European banks could be under-capitalised,” said Mike Jones, strategist at Bank of New Zealand. “Given the turnaround in sentiment, we’ll probably see the kiwi drift lower today.”

The kiwi was little changed at 72.49 U.S. cents from 72.52 cents yesterday, and recently traded at 67.32 on the trade-weighted index of major trading partners’ from 67.31. It rose to 60.76 yen from 60.66 yen yesterday, and rose to 78.51 Australian cents from 78.32 cents. It was little changed at 57.05 euro cents from 57.03 cents, and fell to 46.95 pence from 47.08 pence.

Jones said the currency may trade between 72.30/40 U.S. cents to 72.90 cents today, and is probably going to struggle to get much further than 73.50 cents in the near future without a positive change in “fundamentals from a local picture.”

China brought forward the release data of its retail sales, industrial production and inflation data to Saturday from Monday, sparking rumours the world’s second biggest economy may be paving the way for a rate hike next week.

New Zealand trade data is expected to show an increase in the nation’s terms of trade, while markets will be focusing on Chinese trade data to get a sense of how the country’s economy is doing.

Japan’s Finance Minister Yoshihiko Noda said the government is looking at ways to intervene in the currency, which is around 15-year highs against the greenback. That comes after the Bank of Japan Governor Masaaki Shirakawa said monetary authorities are unable to control currencies.

Better than expected U.S. employment data and an improvement in the trade balance of the world’s biggest economy helped stoke investors’ appetite for higher-yielding assets early in the New York trading session.

(BusinessDesk)

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