Dollar jumps vs euro after ECB lowers economic outlook

The New Zealand dollar jumped against the euro after the European Central Bank lowered its outlook for the region's economy and suggested it may add extra stimulus.

The kiwi rose to 57.42 euro cents at 8am in Wellington, from 56.53 cents at 5pm yesterday. The local currency increased to 63.92USc from 63.41USc yesterday amid speculation the ECB actions may delay the Federal Reserve from hiking interest rates this month.

The euro fell after the ECB lowered its forecasts for inflation and the economy due to weakening growth prospects in emerging markets and a renewed decline oil prices. ECB President Mario Draghi warned conditions could worsen and emphasised the bank's "willingness and ability to act," suggesting it may add to its asset buying programme aimed at stimulating growth.

"The euro declined sharply after ECB President Draghi hinted at the prospect of further policy action," ANZ Bank New Zealand senior rates strategist David Croy and economist Dylan Eades said in a note. "Meanwhile, the New Zealand dollar outperformed."

ANZ expects the kiwi to trade between 63-64.70USc today.

Tonight, the focus will be on the closely watched US non-farm payrolls report, the last piece of major US data before the Federal Reserve's two-day meeting on September 16-17.

The New Zealand dollar advanced to 91.16Ac from 90.33Ac yesterday, gained to ¥76.64 from ¥76.43, and increased to 41.89 British pence from 41.46 pence. It rose to 4.0608 yuan from 4.0296 yuan yesterday, as Chinese equity markets, which have been volatile, are closed Thursday and Friday as part of public commemorations for the 70th anniversary of the end of World War II. The trade-weighted index climbed to 69.55 from 68.94 yesterday.

(BusinessDesk)

Tina Morrison
Fri, 04 Sep 2015

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Dollar jumps vs euro after ECB lowers economic outlook