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Kiwi down on greenback, up on euro

Friday 4th February 2011

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The New Zealand dollar stayed down against the greenback after yesterday's employment data-induced tumble, but climbed out of the hole against a broadly weakening euro.

By 8am the kiwi was buying US77.26c, marginally up from its 5pm level of US77.17c, and rose to 0.5673 euro from 0.5594.

The NZ dollar was dumped yesterday morning after a weaker than expected employment report for the December quarter caused economists to rethink growth forecasts.

The unemployment rate rose to 6.8% in the December quarter from 6.4% in the three months to September, while seasonally adjusted employment fell 0.5% in the quarter.

The NZ dollar fell sharply on the data, from around US77.75c when the figures came out at 10.45am to US77.25c by 11.30am.

ANZ bank said the "much desired" dip in the NZ dollar had seen demand for it across the board.

"It should find itself in the same camp today with plenty of demand evident on any dip under US77c while attempts to the topside will be well capped."

Overnight the euro was crunched after European Central Bank President Jean-Claude Trichet threw cold water on market expectations euro zone interest rates would rise anytime soon.

Trichet, speaking after the ECB's decision to keep interest rates at a record low 1% as expected, said euro zone inflation expectations remain "firmly anchored" and inflationary pressures over the medium to long term "should remain contained".

Adding to broad strength in the US dollar was data showing the US services sector grew in January at its fastest pace since August 2005 while new US claims for unemployment benefits fell sharply last week.

Expectations a recovery is taking hold pushed US 10-year Treasury yields north of 3.51%, above a range that has held solidly since mid-December. Higher bond yields make US dollar-denominated assets more attractive.

The NZ dollar was buying A76.24c at 8am against the Australian dollar, near one-month lows reached overnight and down from A76.40c at 5pm, while the trade weighted index rose to 68.52 from 68.25.



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