WSJ:New Zealand Dollar Up Late On Spanish Bank Bailout, China Data
WELLINGTON--The New Zealand dollar was trading higher late Monday after risk sentiment improved following the release of strong Chinese trade data over the weekend and news of a European Union bailout for Spain's banks.
Spanish Finance Minister Luis de Guindos said Saturday the European Union will grant Spain a loan of up to EUR100 billion that the government will funnel to banks that need capital. Euro-zone finance ministers said they welcomed the Spanish step, saying the sum "must cover estimated capital requirements with an additional safety margin."
The news is "positive as it's just another ring-fencing of the whole contagion fear aspect," said HiFX Senior Trader Stuart Ive.
This added to mixed Chinese data over the weekend, which showed slower inflation and sluggish industrial production but strong readings on exports and imports. The data helped to soothe concerns about an imminent hard landing in China's economy.
However, the New Zealand dollar came off early highs against the greenback later in the Asian session.
"Asia is probably taking the view that it (the bailout) is priced in already, so we want to see what London does with it because that is probably the more meaningful response," said Westpac WBC.AU -1.64% currency strategist Imre Speizer.
He added if London believed the news was fully priced in early in New Zealand trading then the markets will start looking at the next event, particularly the meeting of leaders from the Group of 20 developed and developing nations next week and the Greek election on Sunday.
The Reserve Bank of New Zealand is set to release its monetary policy statement on Thursday. But with the market expecting the central bank to hold the official cash rate at 2.5%, this is remains in the background.
New Zealand government bonds moved lower with interest rate swaps higher as investors moved out of safer assets following the news of the bailout for Spain's banks, said a local bond trader. He added liquidity remained light in the market with most Australian states out on holiday.
