Kiwi dollar up on Europe rate cut, Greek vote cancellation

Photo / Dean Purcell

The New Zealand dollar rose more than 1 US cent as the European Central Bank unexpectedly cut rates and Greece backed off a plan to hold a referendum on its bail-out.

The kiwi rose to 79.46 US cents at 8am from 78.31 US cents at 5pm yesterday.

ECB President Maio Draghi cut the interest rate on the main financing operations of the euro-zone system by 25 basis points to 1.25 per cent and said the economic outlook continued to be subject to particularly high uncertainty and intensified downside risks.

Stocks on Wall Street rallied after Greek Finance Minister Evangelos Venizelos said the Mediterranean country will not hold a referendum. The S&P 500 was up 1.5 per cent as the new trading day got under way in New Zealand. The referendum plan had earlier triggered strong selling in financial markets.

The situation in Greece remains volatile ahead of a confidence vote tomorrow but many commentators argue the indebted country's leader has lost a game of chicken with European leaders.

Investors are hoping the Group of 20 leaders' meeting in Cannes at the weekend moves forward policies that will promote growth in Europe and major economies.

"Obviously Wall Street and the Greece's back-tracking on the referendum have helped kiwi. We've got Reserve Bank of Australia minutes today and US non-farm payrolls tonight," said Murray Hindley, chief foreign exchange dealer at ANZ.

The market was focused on the G20 meeting and developments in Greece, he said.

US non-farm payrolls are expected to have risen by 95,000 in October after a 103,000 rise in September was stronger than forecast.

Earlier this week the Federal Reserve's Federal Open Market Committee reaffirmed the zero to 0.25 per cent target band for the United States' benchmark interest rate after a two-day meeting, and downgraded its 2012 growth forecast.

The kiwi fell to 76.20 Australian cents from 76.34 cents yesterday. It rose to 57.48 euro cents from 57.18 cents yesterday, and gained to 49.56 British pence from 49.22 pence. The kiwi rose to 62.02 yen from 61.13 yen yesterday.

The trade-weighted index rose to 69.39 from 68.84.