Kiwi falls as G7 leaders offer no guidance on Europe

BUSINESSDESK: The New Zealand dollar fell after the leaders of the Group of Seven nations agreed to a co-ordinated response to Europe’s deteriorating financial crisis, though gave no guidance on how to do so, leaving investors wary of a potential rescue.

The New Zealand dollar fell to 75.59 US cents at 8am from 75.82 cents yesterday at 5pm. The trade weighted index was unchanged at 69.15.

G7 leaders agreed to help Spain and Greece sort out their public finances after an emergency conference call late yesterday but no decisive steps were taken to aid the indebted nations.

The talks come less than two weeks before a Group of 20 nations summit that will take place as Greece holds its second general election this year and Germany comes under increasing pressure to take more decisive action to protect the region.

"G7 will come into the conversation today but the reality is they can do a lot of talking but it comes down to implementation," said Alex Sinton, senior dealer at ANZ New Zealand. "There is no short-term fix - until there is action nothing will change."

Rating agency Standard & Poor's is giving Greece a one-in-three chance of leaving the eurozone, which would probably lead to another sovereign default by the Mediterranean nation.

The kiwi was buoyed by a rebound in dairy prices in the latest GlobalDairyTrade auction. Prices surged almost 14% from a three-year low on Fonterra's online trading site.

"A solid overnight global dairy auction result should help to deliver more support for the New Zealand dollar on downside moves," Mr Sinton said.

The New Zealand dollar rose to 77.60 Australian cents from 77.47 cents before the release of Australia's first-quarter gross domestic figures this afternoon.

The Reserve Bank of Australia cut its target cash rate by 25 basis points to 3.5% yesterday as deteriorating global sentiment keeps interest rates expectations low.

Australian employment numbers are also set for release tomorrow.

New Zealand figures out today include the government financial statements for the 10 months ended April 30 and the March quarter's value of building work, followed by the wholesale trade survey from Statistics New Zealand on Friday.

The New Zealand dollar rose to 60.71 euro cents from 60.52 cents yesterday and increased to 49.15 British pence from 48.88 pence. It climbed to 59.53 yen from 59.40 yen.