Kiwi holds gains on US data, EU hopes

20:35, Jun 05 2012

The New Zealand dollar eased against the greenback in the offshore session, but broadly held its gains as improved US services data and hopes of further monetary stimulus boosted investors' appetite for risk.

The kiwi recently traded at US75.62 cents, down from US75.76c at 5pm yesterday; while on the Trade Weighted Index of major trading partners' currencies it rose to 69.17 from 69.11.

Global markets appeared to have recovered from the shock of Friday's weaker US job numbers, with a surprise jump in the ISM non-Manufacturing Index boosting equities.

The euro plunged early in the session after Spain called for outside support to help it shore up its troubled private sector banks, although it pared losses as investor bet the European Central Bank may unveil further policy stimulus at its meeting tonight.

The ECB is expected to keep its main lending rate on hold at 1 per cent, although there is talk it may make adjustments to the marginal lending rate which stands at 1.75 per cent.

The mood was also bolstered by a commitment from the Group of Seven Nations to coordinate their efforts to resolve the European crisis.

"It was a cautious return of risk appetites to financial markets overnight, which has allowed Aussie and the kiwi to hold their own against a broader strengthening of the US dollar," said Mike Jones, a market strategist at bank of New Zealand.

Dairy prices surged 13.5 per cent at the latest Fonterra auction overnight, as buyers returned to the market and supplies tightened due to the close of the New Zealand production season. The average winning price was US$2899 per metric tonne, the highest level since April.

On the crosses the kiwi recently traded at 77.57 Australian cents, up from A77.46c yesterday, and it rose to 59.52 yen from 59.40 yen. The New Zealand currency rose to 60.75 euro cents from 60.49 euro cents, and was little changed at 49.16 pence from 49.20 pence.

The kiwi may trade between a range of US75c and US76c, Jones said, but cautioned that currency was vulnerable to declines, especially if European stimulus failed to emerge.