Kiwi drifts off from strong start

Monday 23rd May 2011

The New Zealand dollar drifted lower today after rising during the weekend to near US80c.

At 5pm today the NZ dollar was buying US79.10c, down from US79.40c at 8am but little changed from US79.12c at 5pm on Friday. It got to within a whisker of US80c early on Saturday, its highest level in 2-1/2 weeks.

Rankin Treasury said that the NZ dollar improved a US cent in week that included the Government budget last week, which demonstrated that the global markets were in accord with what the budget set out.

There is speculation that insurance flows are driving the NZ dollar but international factors remain a driver.

"The major influences on the NZ dollar remain offshore. At this stage the Greek issue seems limited to the euro and not causing a serious risk off scenario as seen last May," Rankin Treasury said.

The euro has been under pressure after Fitch ratings cut Greece's debt rating by three notches on Friday, while Standard & Poor's cut the outlook for Italy's rating to negative.

The NZ dollar rose to 0.5613 euro at 5pm from 0.5526 at the same time on Friday.

Weak equity markets were also another weight on global sentiment.

Westpac said that the NZ dollar will encounter resistance at US80.00c and above, and could correct to US78.80c during the next day or two.

The NZ dollar was little changed at A74.74c at 5pm from A74.60c at 8am but was up from A74.17c at 5pm on Friday.

It lifted to 64.79 yen from 64.57 at 5pm on Friday. The trade weighted index rose to 68.91 from 68.44.

NZPA

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