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The New Zealand dollar fell against the euro after the Cypriot government stitched together a lifeline from the European Union and International Monetary Fund to keep the Mediterranean nation from defaulting and forcing the first euro-exit.
The kiwi fell to 64.05 euro cents at 5pm in Wellington from 64.22 cents on Friday in New York. The local currency traded at 83.47 US cents at 5pm from 83.51 cents at 8am and 83.51 cents last week.
The IMF, EU and European Central Bank have agreed to a plan granting a 10 billion euro loan to keep Cyprus solvent in a deal that will call for the closing down and splitting up of lender Cyprus Popular Bank, according to a Bloomberg report. IMF managing director Christine Lagarde said the deal “focuses on dealing with the two problem banks and fully protecting insured deposits in all banks” without placing an excessive burden on Cypriot taxpayers.
“It’s not over until the fat lady sings, and it could fall over when they try to iron out the final details,” said Michael Johnston, director of foreign exchange at HiFX in Auckland. “I still prefer to sell the kiwi on rallies” with the downside risk greater than any upside potential, he said.
Johnston said the currency may trade between 83 US cents and 84 cents as investors look for more detail in the Cypriot deal.
The local currency may rise over the course of the week according a BusinessDesk survey. Five strategists expect the kiwi will trade between 82.20 US cents to 84.50 cents this week, with a bias to the topside.
The New Zealand dollar was little changed at 79.89 Australian cents from 79.91 cents last week, and gained to 79.14 yen from 78.84 yen. It was little changed at 54.75 British pence from 54.73 pence.
The trade-weighted index was at 76.43 from 76.47 in New York on Friday.
(BusinessDesk)