NZ dollar heads for 1.7% weekly gain in run-up to Greek poll 15 Jun 2012
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By Paul McBeth
June 15 (BusinessDesk) - The New Zealand dollar is heading for a 1.7 percent weekly gain in the run-up to the Greek election this weekend, which investors see as a make-or-break on the future of the Mediterranean nation's participation in the euro-zone.
The New Zealand dollar rose to 78.30 US cents at 5pm from 78.11 cents just before 8am, and 77.74 cents yesterday. The trade weighted index increased to 70.91 from 70.64 yesterday and is poised for a 1.9 percent gain.
Greek voters got to the booths on Sunday for the second time this year after failing to elect a government in April. Markets will be watching to see how Syriza performs, as the radical left-wing party has promised to renege on Greece's side of its bailout package. A final result won't be known until after markets have opened, while negotiations to form a coalition government will take longer.
"I don't think we're going to get an outcome of 'oh wow it's all over for Greece, they're out', we're going to get a result with varying degrees of uncertainty," said Chris Tennent-Brown, FX economist at Commonwealth Bank of Australia in Sydney. "The kiwi and the Aussie have picked up," on the growing view central banks will coordinate their actions if another crisis occurs, he said, referring to the trans-Tasman currencies colloquially.
That comes after New Zealand's Reserve Bank held the official cash rate at 2.5 percent yesterday, with Governor Alan Bollard stressing the European threat. The central bank gives a worst-case scenario a one-in-ten chance of happening, while Greece has a three-in-ten chance of leaving the euro-zone.
Finance Minister Bill English told the Wall Street Journal Asian central banks are pushing the kiwi dollar higher, and it may rise as high as 80 US cents. That matches the demand for the Australian dollar, as Germany emerged as a buyer for that currency earlier this week.
"New Zealand Australia are looking pretty good compared to a lot of other options - you get a positive real yield," Tennent-Brown said.
The New Zealand dollar rose to 61.96 euro cents from 61.77 cents yesterday, and gained to 50.39 pence from 50.06 pence. It was little changed at 78.09 Australian cents from 78.03 cents yesterday, and was little changed at 61.79 yen from 61.74 yen yesterday.
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