Kiwi hits fresh euro high on Spanish woes

20:55, Jul 19 2012

The New Zealand dollar hit a fresh high against the euro after the Germany finance minister voiced concerns over the threat Spain's beleaguered banks posed to the eurozone economy.

The kiwi recently traded at 65.39 euro cents, having peaked at 65.66 euro cents in the overnight session, from 65.15 euro cents yesterday.

German Finance Minister Wolfgang Schaeuble's comments were made ahead of a vote on whether Spain's banking sector would receive 100 billion euro (NZ$152b) bailout, a measure which was passed by lawmakers in Europe's biggest economy.

"Fractious euro/US dollar trading dominated the overnight session as fear and confusion over the plight of Spain set in once again," said Mike Jones, a market strategist at Bank of New Zealand. "The net result is that the euro has tumbled to fresh lows against a range of currencies."

Growth-linked currencies also saw further support after a spate of weaker US data bolstered the markets hopes on further US economic stimulus.

Federal Reserve Chairman Ben Bernanke this week said the US central bank stood ready to act if the situation deteriorates, a move that appeared increasingly likely after measures of US joblessness, existing homes sales and mid-Atlantic factory activity all deteriorated.

That saw the kiwi open at US80.28 cents, up from US80.05c yesterday, while on the Trade Weighted Index of major trading partners' currencies, it was little changed at 72.36 from 72.32.

Wall Street proved a further tailwind for Australasia currencies, with the Standard & Poor's 500 Index posting a third day of gains, up 0.3 per cent to 1377.05 after better-than-expected earnings from IBM and Ebay.

Of the S&P500 companies that have reported so far, 66 per cent have exceeded expectations, according to Jones.

The kiwi was outpaced by the Australia dollar in the session though, slipping to 76.99 Australian cents from A77.05 yesterday - a two-month low. The aussie appeared to be supported market speculation the Reserve Bank of Australia will hold its official interest rate at 3.5 per cent.

The kiwi recently traded at 63.15 yen, up from 62.87 yen, and it slipped to 51.07 pence from 51.14 pence.

Jones said the kiwi may break through the June high of US80.80c in the next few session as the momentum behind the current swell in risk appetites plays itself out across major markets.