The New Zealand dollar rose against the greenback after news of a Greek bank merger and stronger-than-expected US consumer spending figures spurred investors' appetite for higher-yielding, or riskier, assets such as equities and growth-linked currencies.
The New Zealand dollar recently traded at 84.58 US cents, up from 84.39 cents yesterday having earlier broken through the major resistance level in afternoon trade. It was little changed at 71.13 on the trade-weighted index of major trading partners' currencies from 71.12 previously.
Global stock markets rallied after Greece's Alpha and EFG Bank agreed to merge to create the biggest bank in southeast Europe. The move soothed frayed nerves from investors concerned about the health of the sector, which has been battered by the debt crisis and recession. The deal was helped by a capital injection from the Qatar Investment Authority, and was hailed by the Greece's central bank as a vote of confidence in the country's banking systems and economy.
Investor sentiment was further buoyed after US consumers spending rose 0.8 per cent in July, its fastest pace in five months. The Standard & Poor's 500 Index rose 2.7 per cent to 1,208.13, and Europe's Stoxx 600 closed 1.2 per cent higher at 228.28.
"The good news out of Europe, coupled with better US data, was just what market wanted to see after the news flow was universally negative for the past month," said Khoon Goh, head of market economics and strategy at ANZ New Zealand. "People have started to put cash to work, and so we've seen typical risk-on moves," with the gain in equities giving the "kiwi and Australian dollars another kick up".
