NZ dollar extends gains as stocks rally ahead of Greek deal

NZ dollar extends gains as stocks rally ahead of Greek debt conclusion

By Paul McBeth

Feb. 20 (BusinessDesk) – The New Zealand dollar extended gains in the local trading session as Asian Pacific stock markets rallied on the prospect European policymakers will finally ratify Greece’s bail-out.

The New Zealand dollar rose to 84.12 US cents at 5pm from 83.84 cents just after 8am in Wellington and up from 83.36 cents on Friday in New York. The trade-weighted index advanced to 74.08 from 73.53.

Stocks rallied today as investor sentiment was optimistic finance chiefs from the Euro-zone area would sign off on a 130 billion euro package to stave off a Greek default on repaying sovereign debt.

Greece’s debt woes have lingered for the past 18 months as the region’s leaders struggle to reach agreement on what’s required for the Mediterranean nation in return for a bail-out. Japan’s Nikkei 225 Index rose 1.4 percent to 4512.93, Hong Kong’s Hang Seng gained 0.7 percent to 21637.84 and Australia’s ASX/S&P 200 Index climbed 1.1 percent to 42.43.40 in afternoon trading.

“The risk-reward for dipping your toe into the currency world is not great, and it’s very much a case of the market saying it will wait and see,” said Mike Jones, currency strategist at Bank of New Zealand. “The fundamentals look overstretched, the positioning on the kiwi dollar looks overstretched and we’ll have to wait to see if the global rally continues for the kiwi dollar to go higher.”

Investor sentiment was bolstered after the People’s Bank of China cut lenders’ reserve ratio requirements by half a percentage point, meaning banks won’t have to hold as much cash in relation to their loan book. The measure is seen as a bid to fuel lending and maintain growth in the world’s second-biggest economy.

That helped push the kiwi to a six-and-a-half month high 67.29 yen, as investors remain wary of Japan after the world’s third-biggest economy reported a widening of its trade deficit in January. The kiwi rose to 66.93 yen at 5pm from 66.29 yen last week.

The pending Greek deal and measures taken by Chinese policymakers may push the kiwi dollar higher this week, according to four out of five strategists surveyed by BusinessDesk.

Trading will likely be thin in the Northern Hemisphere session with US markets for Presidents Day on Monday.

Analysts will keep an eye on the Reserve Bank’s survey of inflation expectations tomorrow, with traders unsure as to whether respondents will cut their expectations in line with the recent reduction in headline inflation.

The kiwi rose to 78 Australian cents from 77.78 cents last week, and climbed to 63.66 euro cents from 63.24 cents. It gained to 52.98 pence from 52.61 pence on Friday.

(BusinessDesk)

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