Kiwi trades higher ahead of Euro debt meeting

Photo / Greg Bowker

The New Zealand dollar crept higher against the euro and the greenback as European finance ministers prepare to meet for a fresh round of talks in a bid to lighten Greece's debt burden and tackle the region's sovereign debt crisis.

The New Zealand dollar rose to 62.56 euro cents at 5pm, from 62.47 cents at 8.30 am. It traded at 80.66 US cents, up from 80.48 cents.

The elements are now in place for a deal to be struck between the Greek government and bondholders but it is up to the European Union and the International Monetary Fund to sign off on it.

In October, European officials and Greece's private bondholders agreed to implement a 50 percent cut of more than 200 billion euros of Greek debt by voluntarily exchanging outstanding bonds for new securities. They had hoped to strike a deal before European finance ministers met in Brussels today.

"That is the major event we are looking forward to," said Richard Grace, chief currency strategist at the Commonwealth Bank of Australia in Sydney.

"It depends on what they come up with but the trend has been towards lower volatility - benefiting the kiwi."

Inflation figures released last week highlighted there is very little urgency for the Reserve Bank to increase the official cash rate before the end of 2012.

ASB Institutional expects the RBNZ will leave the OCR unchanged at 2.5 percent at Thursday's review, amid downside risks from the ongoing European debt crisis, as progress to stabilise the crisis remains slow.

"I don't think we are looking at a game changer," Grace said.

"There is not a lot driving near term direction for the New Zealand dollar. The kiwi will continue to trade in its recent range."

France and Germany are both scheduled to hold bond auctions tonight, followed by Italy on Thursday and Friday.

There was no local data released today, which was a public holiday in Wellington.

The New Zealand dollar gained to 62.12 yen from 61.91 yen and 51.89 British pence from 51.73 pence. It fell slightly to 76.88 Australian cents, from 76.93 cents.

The trade-weighted advanced to 71.63 from 71.50.