The New Zealand dollar rose to a nine-month high as hopes Germany will avoid recession and optimism the Federal Reserve will enact more easing measures helped stocks rally and lift risk sentiment.
The kiwi dollar climbed to 83.83 US cents from 83.43 cents at 5pm in Wellington yesterday. The trade-weighted index rose to 74.84 from 74.66.
The euro gained and stocks rose across Europe, with the Stoxx 600 Index gaining 0.3 per cent, after Germany's ZEW Center for European Economic Research said its index of investor and analyst expectations rose to 6.9 in December from minus 15.7 last month, beating expectations. The rally extended onto Wall Street and the Standard & Poor's 500 Index gained about 0.9 per cent on speculation the Fed will announce a fresh round of quantitative easing.
Germany is "the bright spot in Europe," said Mike Jones, strategist at Bank of New Zealand. Improved investor sentiment "suggests Germany may yet avoid a recession. The rally started in Europe and spilled over to the US."
Whether growth-linked assets rally more on a Fed announcement of further easing may depend on the size of the programme, Jones said. The kiwi may be approach 84 US cents today and find support at around 83.60 cents, he said.
