The New Zealand dollar drifted up from a five-year low on Thursday, taking heart from gains in Asian stocks as investors took the news of Greece's default on an IMF loan in stride. As expected, Athens was unable to make a scheduled 1.6 billion euro loan repayment to the lender after last-minute overtures to international creditors failed to break a deadlock.
The fate of Greece's membership in the 19-nation currency bloc hangs in the balance ahead of a referendum on Sunday when Greek citizens will vote on whether to accept the austerity terms of continued international aid. "It's no surprise Greece failed to meet the International Monetary Fund loan payment and requested an extension. Traders are now shifting focus to this weekend's referendum," said Stephen Innes, a senior trader at FX/CFD firm OANDA Australia and Asia Pacific.
The kiwi dollar rose 0.4 percent to $0.6796, pulling away from a five-year low of $0.6748 touched overnight. Near-term support is the overnight low, with $0.6850 capping the topside. The next test for the currency is dairy giant Fonterra's auction due early Thursday local time. It also gained back a bit of ground against the other majors. The kiwi pushed up to 83.27 yen, from a 17-month trough of 82.44. The Australian dollar eased to NZ$1.1352, from a 19-month peak of NZ$1.1388.
The Aussie, however, was firmer against the greenback. It edged up 0.1 percent to $0.7720, continuing to recover from a 2-1/2-month trough of $0.7587 set on Monday. Traders said the bounce from Monday's low was positive for the Aussie's near-term outlook. "The support has caught the attention of more than a few Aussie bears after everything short of the kitchen sink was thrown at the pair early in the week," Innes added.
Also giving the Aussie a helping hand was encouraging data from China, Australia's single biggest export market. Official surveys showed activity in China's ailing factory sector expanded slightly in June, while growth in the services sector picked up, suggesting the broader economy was starting to level out. Given the lack of any panic reaction, demand for government bonds also dipped. New Zealand government bonds yields were as much as 5 basis point higher at the long end of the curve. Australian government bond futures eased with the three-year contract 2 ticks lower at 97.900. The 10-year contract shed 4.5 ticks to 96.9050.
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