NZ dollar gains as Citigroup bailout builds appetite for risk
By Paul McBeth
Nov. 25 – The New Zealand dollar rose a second day after U.S. and European stocks rose on a rescue package for
Citigroup and a U.K. spending plan to halt its recession, lifting investor appetite for higher-yielding, or riskier,
assets.
The U.S. government pledged to guarantee US$306 billion of toxic assets owned by Citigroup in a package that
will be passed by the Congress in January. The package saw the banking giant’s stocks rise 52%, paring its 60% loss in
value last week. European stocks were buoyed by English Chancellor of the Exchequer Alistair Darling’s 20 billion pound
recovery package for the British economy. The FTSE 100 bounced 9.8% and the DAX 30 jumped 10.3% on the news.
“The rise in equities has set the tone for the kiwi,” said Imre Speizer, currency strategist at Westpac Banking
Corp. “There’s been a drop in risk aversion.”
The New Zealand dollar rose to 54.42 U.S. cents from 52.94 cents yesterday, and increased to 52.66 yen from
50.45 yen. It fell to 84.14 Australian cents from 84.44 cents.
Speizer said while the 54 U.S. cent mark was a “key lead” for the kiwi, it is still expected to trend lower in
the long-term. He said the New Zealand dollar will likely trade between 54 U.S. cents and 55.50 cents today.
The rebound in global stocks reinvigorated appetite for the kiwi and may last “for a while,” said Danica
Hampton, currency strategist at Bank of New Zealand.
The U.K. government’s stimulus package helped offset gloomier figures in Germany, where the latest Ifo business
index fell to 85.8 in November, its lowest point in 16 years.
The fall in the Ifo index suggests the Eurozone recession will probably go “well into 2009,” Hampton said. The ongoing
fears of a deep global recession will continue to see support for the U.S. dollar and yen, she said.
(Businesswire)