NZ dollar rises with equities, but euro fears linger

The NZ dollar rose against the greenback, following global equities higher on Friday. Photo / Dean Purcell

The New Zealand dollar rose against the greenback, following global equities higher on Friday, but failure by European finance ministers to table any further concrete steps to hem in the European financial crisis over the weekend weighed on the kiwi in early trade.

The New Zealand dollar recently traded at 82.59 US cents, up from 82.52 cents on Friday in New York, and rose to 72.36 on the trade-weighted index of major trading partners' currencies from 72.09 previously.

Global equities closed the week in the black, with share markets riding out the momentum from the announcement last week that a group of major central banks had agreed to provide US dollar funding to European private sector banks.

On Wall Street, the Standard & Poor's 500 Index rose 0.6 per cent to 1216.01, while Europe's Stoxx 600 Index rose 0.6 per cent to 230.16.

Hopes that the funding announcement would be followed up by a commitment from politicians to were however dashed when a meeting of European finance ministers and US Treasury Secretary Tim Geithner in Poland failed to make any headway in implementing further policy measures to address Europe's sovereign debt crisis.

"It started off when the major central banks agreed to provide additional liquidity to European banks, providing the spark for equities to rally and that flowed through into the kiwi," said Khoon Goh, head of market economics and strategy at ANZ New Zealand.

Following the central announcement "people were maybe thinking this was part of the plan, that politicians would follow it up with further policy, but the finance ministers meeting over the meeting didn't come up with anything concrete. We're left with pretty much same sit as before."

On the crosses, the kiwi recently traded at 80.07 Australian cents, up from 79.85 cents on Friday, and rose to 63.58 Japanese yen from 63.34 yen previously. It rose to 60.02 euro cents from 59.82 cents last week, and gained to 52.41 pence from 52.34 pence previously.

US economic data showed a glimmer of positivity after last week's tranche of poor manufacturing and employment numbers, with the University of Michigan Consumer Confidence Index climbing to 57.8 from 55.7, beating expectations.

One and five-year inflation expectations also rose to 3.7 per cent and 3 per cent respectively, from 3.5 per cent and 2.9 per cent previously.

The kiwi may trade between a range of 82.40 US cents and 83.43 cents, Goh said, with the bias tipped towards the downside.