Dollar hits record high against euro as EU ministers stall

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The New Zealand dollar hit a record high against the euro amid speculation European finance minister will delay a decision on Greece's second bailout package until April.

The New Zealand dollar rose as high as 64.11 euro cents, the highest since the 17-nation currency entered circulation in 2002. It traded at 63.85 cents just after 8am from 63.66 cents yesterday at 5pm. The kiwi rose as high as 84.08 US cents, a five-month high, and recently traded at 83.33 cents, down from 83.84 cents yesterday.

Investors fled the euro following speculation European finance ministers will delay signing off on a bailout package for Greece until after its April elections. Leaders were scheduled to meet in Brussels yesterday to sign off on an aid package worth $130 billion euros in order for Greece to make its March 20 bond payment and avoid default. The ministers will now meet on February 20.

"Downbeat headlines on Greece contributed to ongoing negative market sentiment - it didn't stop us hitting near historical highs against the euro," said Alex Sinton, senior dealer at ANZ New Zealand. "When you weigh up everything we are still relatively more attractive."

In New Zealand, the Treasury releases its budget policy statement this morning, including revised economic forecasts and a full economic and fiscal update ahead of this year's budget.

"We are walking a fiscal tight rope at the moment and we wouldn't want anything to knock us off but the government has already restated its intention to return to surplus," Sinton said.

It is a data heavy day locally as well, with the Bank of New Zealand PMI, ANZ Job Advertisements survey and ANZ Roy Morgan consumer confidence survey set for release.

Reserve Bank Governor Alan Bollard is scheduled to give a speech tomorrow titled 'Could We Be Better off than We Think?', which may talk up New Zealand's economy in relation to the rest of the world.

Dairy prices were down 3 percent at the GlobalDairyTrade auction this morning. The average winning price fell to US $3,545 a metric tonne. Anhydrous milk fat prices slumped 10.5 percent, with whole milk powder prices were down 3 percent.

In the US, the Federal Open Market Committee minutes released this morning said the central bank may soon have to consider more asset purchases, while some committee members said the economic outlook would have to deteriorate first.

The central bank said at its meeting last month that it plans to hold interest rates near zero at least through late 2014 to spur growth and reduce unemployment, extending a previous date of mid-2013.

The New Zealand dollar fell to 77.94 Australian cents just after 8am from 78.02 cents and 53.11 British pence from 53.32 pence. It dropped to 65.26 yen from 65.81 yen.
The trade-weighted index sank to 76.61 from 73.84.