NZ dollar pares loss after Europe cuts a deal on Greek debt

NZ dollar pares loss after Europe cuts a deal over Greek debt

By Paul McBeth

Feb. 21 (BusinessDesk) – The New Zealand dollar pared losses in local trading after European finance chiefs cut a deal that will let Greek dodge defaulting on debt repayments next month, stoking investors’ appetite for risk-sensitive assets.

The New Zealand dollar climbed as much as a cent after the Greek deal was announced, and was little changed at 83.74 US cents at 5pm from 83.88 cents at 8am down from 84.12 cents yesterday at 5pm. It declined to 73.77 on the trade-weighted index from 74.08 yesterday.

Greek private bondholders accepted a bigger writedown in the value of their debt after Euro-zone finance ministers argued over the terms for a second bailout package to the heavily indebted Mediterranean nation, according to Bloomberg. The 130 billion euro funding line means Greece will dodge defaulting on its debt, and helped shore up investor sentiment for higher-yielding assets.

“This marks some sort of finality to the second Greek rescue package,” said Imre Speizer, market strategist at Westpac Banking. If it emerges that the deal isn’t as clear as it could be, “the kiwi will hold rather than be propelled much higher.”

The deal came out not long after the kiwi has shed 80 basis points after respondents to the Reserve Bank’s survey of expectations pared back their inflation outlook by half a percentage point. The survey came after government figures showed the consumer prices index unexpectedly shrank in the final three months of 2011. Traders are betting Governor Alan Bollard will hike the official cash rate 22 basis points over the coming 12 months from its current 2.5 percent level, according to the Overnight Index Swap curve.

Investors’ appetite for risk-sensitive assets had taken a dent earlier in the day after the minutes of the last Reserve Bank of Australia meeting were released, and suggested there’s scope for the target cash rate to stay on hold at 4.25 percent.

The kiwi rose to 78.18 Australian cents from 77.78 cents yesterday, and fell to 66.72 yen from 67.29 yen.

It declined to 63.17 euro cents from 63.66 cents yesterday, and decreased to 52.82 pence 52.98 pence.

(BusinessDesk)

© Scoop Media