NZ dollar gains on euro bounce

Photo / Greg Bowker

The New Zealand dollar rose against the greenback, following the euro higher after Germany signalled it would work together with European officials on a debt plan for Greece.

The euro received a confidence boost late last week as German Chancellor Angela Merkel backed down on a demand that private bondholders be included in any Greece debt structuring before it would participate. The European single currency last traded at US$1.42.85, up from US$141.36 on Friday.

That lifted the market's hopes that European finance ministers would be able to put together a second Greek bailout package when they meet in Luxembourg this week.

The upbeat sentiment saw equities snap their recent run of declines, with the Standard & Poor's 500 Index closing 0.3 per cent higher at 1,271.7, and Europe's Stoxx gaining 0.2 per cent to 267.17.

"Germany backing down from their strict stance was taken as positive sign for the market, which was enough to see the euro recover, and risk currencies making a bit of a comeback," said Khoon Goh, head market economics and strategy at ANZ New Zealand.

"Policy makers want to avoid a similar style systemic contagion as Lehman, which is the reason why the European Central Bank is dead set against a default, the ramifications from that would be quite large."

The kiwi recently traded at 80.82 US cents, up from 80.21 cents on Friday in New York, and rose to 69.97 on the trade-weighted index of major trading partners' currencies from 69.73. It slipped to 76.19 Australian cents from 76.25 cents last week, and climbed to 64.74 yen from 64.54 yen. It dropped to 56.56 euro cents from 56.73 cents on Friday, and gained to 49.96 pence from 49.82 pence previously.

The kiwi may trade between a range of 80.80 US cents and .81.54, Goh said.