Kiwi surge pauses amid Cyprus fears
The New Zealand dollar's surge against the greenback has halted due to renewed fears Cyprus will not come up with a bailout deal in time to save the Mediterranean island nation from financial collapse.
The kiwi was up marginally this morning at US83.36 cents compared with US83.32c at 5pm on Friday, but its upward trend had stopped.
On the Trade Weighted Index of major trading partners' currencies the dollar remained unchanged from Friday, at 76.40.
The kiwi reached its highs just around expected resistance levels on Friday, when traders believed Cyprus was close to a deal to help them raise the EURO5.8 (NZ$9b) it needs to clinch an international bailout of EURO10b.
However, Cypriot lawmakers have still not reached an agreement on bailout conditions, and with today's deadline imminent the collapse of its financial system and rejection from the eurozone is becoming a genuine fear.
The controversial scheme to tax some banks deposits is back on the table, as Cyprus' banks scramble to raise their contribution to the bailout.
HiFX senior dealer Stuart Ive said what happened to the kiwi would depend on whether Cyprus was able to come out of today's meeting with a deal to raise the EURO5.8b.
"We can't judge anything until we know the outcome," he said.
Ive said the International Monetary Fund was believed to be playing "hardball" on the terms of any bailout.
If Cypriot lawmakers were able to reach an agreement, it would restore risk sentiment and the New Zealand dollar would rise through its resistance level to US84.20c, but if a deal was not made the kiwi would drop to its expected support level of about US82.40c, Ive said.
Closer to home trade balance figures would be released tomorrow, but was unlikely to have an impact on the market, he said, adding "it's all about Cyprus".
On the crosses, the kiwi recently traded at 79.84 Australian cents, up from A79.79c at 5pm Friday, and at 78.98 yen, marginally down from 79 yen. It traded at 64.33 euro cents this morning, slightly down from 64.42 euro cents, and 54.70 British pence, down from the 54.79p it traded at on Friday evening.