NZ dollar extends gain as Greek debt deal comes into focus

The New Zealand dollar extended its recovery from a five-year low against a backdrop of increasingly investor concern about the negotiations between Greece and its international creditors.

The kiwi rose to 69.15 US cents at 5pm in Wellington from 68.86 cents at 8am and 68.53 cents yesterday. It advanced to 61.70 euro cents from 61.32 cents yesterday.

Greece has just five days to stave off default on a 1.5 billion euro scheduled debt repayment due June 30, and is in protracted negotiations with its European lenders over what austerity measures it will have to introduce to unlock a 7.2 billion euro bailout fund.

Greek Prime Minister Alexis Tsipras is expected to resume talks with the European Commission, European Central Bank and International Monetary Fund after failing to cut a deal yesterday, though any agreement would also need to be ratified by the Greek parliament.

“The European authorities don’t want to bow down to Greece too much, but they also don’t want Greece to go. They’ve got to walk that fine line and be confident that if they do kick them out of the euro and don’t cut them any slack, everything else is alright and we don’t have any contagion,” said Michael Johnston, senior dealer at HiFX in Auckland. “The kiwi has fallen a long way in a short space of time, and obviously the Reserve Bank’s cut in that time, but maybe we need to see a bit of a bounce back.”

Reserve Bank of New Zealand figures today showed high loan-to-value ratio mortgage lending crept higher in May, while remaining below the regulator’s limits. The nominal value of high LVR mortgages written in May was $484 million, the highest face value since October 2013 when the original restrictions were put in place.

New Zealand’s two-year swap rate was unchanged at 3.09 percent at 5pm in Wellington from yesterday, and the 10-year swap rate slipped to 3.94 percent from 3.97 percent.

The local currency climbed to 89.27 Australian cents from 88.80 cents yesterday and rose to 4.2932 Chinese yuan from 4.2548 yuan. It increased to 85.48 yen from 85 yen yesterday, and gained to 44.05 British pence from 43.54 pence. The trade-weighted index advanced to 72.19 from 71.61.

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