The Opening Bell: Where currencies start on Friday, October 28, 2011

By Dan Bell

Markets SOAR as the EU bailout is agreed upon…

Main points:

•     Nominal write-down of 50% (EUR 100bn) of Greek debt in private hands; Greek debt owned by official lenders not touched
•     Remaining Greek debt will be refinanced at preferential rates
•     Closer supervision of Greek adherence to the program
•     EFSF to be levered 4-5 times
•     President Sarkozy will speak with China on EFSF involvement
•     Estimates of EFSF firepower ranged from EUR1.0-1.4tn
•     Italy to deliver specific budget and deficit reduction program
•     Banks must meet minimum capital requirements, seek private capital to cover shortfall
•     If private capital raising insufficient, national governments and then EFSF to meet banking sector needs

But have we seen anything new? Will this be enough? The NZDUSD has raced higher to open around 0.8200 this morning! The world is a happier place today… allegedly…

The EURUSD has seen a 4c rally (1.3850 – 1.4250), the AUDUSD has almost seen 4c as well (1.0380 – 1.0750) – RISK ON

The NZD rallied after yesterday’s predictable RBNZ decision to hold rates at 2.50%, don’t expect a rate cut here until mid-2012 now

Global stock markets have clearly had a positive night: Dow Jones +3.22%, S&P +3.38%, FTSE +0.5%. Commodities the same, CRB Index currently +2.57%.

Against the crosses.. AUD 0.7650, EUR 0.5780, GBP 0.5095, JPY 62.25

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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here