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Euro and NZ coins - Source: ONE News -
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The New Zealand dollar surged to a new 33-month high against the euro and a leading currency strategist expects it to go even higher.
The rise came amid fears that a euro-zone debt crisis may spread
beyond Greece, and after Greeks rioted over harsh austerity
measures, leaving three people dead in a torched Athens bank.
The Kiwi peaked around 0.5595 euro shortly before 8am, having
climbed from 0.5551 at 5pm yesterday.
BNZ currency strategist Mike Jones told NZI Business this morning that he thinks that growth will continue.
"We are seeing the euro continue to slide in offshore markets...that has pushed the Kiwi...we think that is a trend that is probably to continue, perhaps for the rest of this year"
Jones says the problems facing the euro-zone are not short-term but serious, long-term matters of a systemic nature and he thinks New Zealand exporters should be aware that the Kiwi may rise above .60.
European anxiety
Anxious investors sold European stocks and drove up the cost of insuring Greek, Spanish and Portuguese debt against default, while taking refuge in the US dollar as Moody's put Portugal's credit rating on review for a possible downgrade.
"Contagion fears are driving the market and add to pressure on the euro, as does the ongoing civil unrest in Greece that may make it hard to institute reforms," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
At the same time, the greenback received a boost from data showing US private sector employers added 32,000 jobs last month.
The NZ dollar continued to fall against the greenback, dropping to a week low around US71.40c early today before regaining some ground to US71.68 by 8am. That was down from the US71.90c at 5pm yesterday as the Kiwi continued to fall away from a three-month high US73.25c on Saturday.
Against the Australian dollar, the Kiwi was little changed from the local close to be at A79.16c around 8am, while slipping to 67.20 yen at the local open from 67.95. The trade weighted index was 67.88 at 8am from 67.95 at 5pm.
Kiwi dollar holding up
Jones says it is worth noting the Kiwi has held up fairly well as the European debt crisis has unfolded.
"The fundamentals underpining the New Zealand dollar are still fairly solid. We have got an economny that is growing at a faster rate than most of our trading partners, we've got commodity prices that are going from strength to strength and a central bank that is probably going to raise interest rates ahead of most of our trading partners (aside from Australia)."
He says those factors will continue to support the Kiwi but he did acknowledge there was a risk to the New Zealand currency if the euro crisis spiralled out of control and European countries collapsed.
Jones also doubts a speech from Reserve Bank Governor Alan Bollard at 10am today would give a clear steer on whether a rise in benchmark interest rates was likely in June or in July but says the key focus today for the NZ dollar is the household labour force survey, including the unemployment rate, to be published at 10.45am.
That data could influence the timing of a hike in the official cash rate.
