NZ dollar up on Wall St surge, Fonterra auction

Photo / Dean Purcell

The New Zealand dollar rose as a rally on Wall Street driven by bank earnings countered the impact of a warning about France's credit rating on sentiment.

The kiwi dollar rose at 79.67 US cents at 8am from 79.36 US cents at 5pm yesterday, after it dipped to 78.71 US in overnight trading.

As the New Zealand market started a new day the United States stock market was powering ahead, helped by a Bank of America profit report. The Standard & Poor's 500 was up 2.2 per cent, having earlier been down as much as 0.8 per cent.

The average price of dairy products rose 1.7 per cent in Fonterra's latest online auction. The average winning price rose to US$3,540 a metric tonne, climbing from the lowest level in more than a year in the previous auction two weeks ago.

"The market didn't pay great attention to the Fonterra auction but it was a solid result. We have seen commodity prices recover a fair way in the last fortnight," said Mike Burrowes, market strategist at Bank of New Zealand.

He said currency markets were in a holding pattern ahead of the European Union summit this weekend.

The optimism evident at the start of the week that European leaders were serious about tackling the region's debt problems has waned as politicians moved to manage expectations lower.

German Chancellor Angela Merkel said the summit will mark an "important step" though not a final one in resolving the debt crisis.

A warning by Moody's that it may put France's Aaa rating on a negative outlook in the next three months was another damp on sentiment. Investors want to be reassured Europe's financial system can withstand a potential Greek debt default and that Greece is making progress.

The impact of a weak Europe was also evidence yesterday when China reported its economy grew 9.1 per cent in the third quarter from a year ago, which was less than expected and the slowest pace since 2009.

The New Zealand dollar was little changed at 77.58 Australian cents from 77.65 cents yesterday, and rose to 61.15 yen from 60.96 yen yesterday. It declined to 57.82 euro cents from 57.57 cents, and rose to 50.59 British pence from 50.16 pence.

The trade-weighted index was at 69.73 from 69.52 yesterday.