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Kiwi refuses to drop below US75c

Thursday 17th February 2011

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The New Zealand dollar stubbornly refused to drop into the US74c zone today despite remaining vulnerable to a dive.

The kiwi dropped close to the US75c level against the greenback again overnight, and efforts to move higher early today looked flimsy.

That was despite the United States dollar slumping broadly after Israel said Iranian warships were en route to Syria, with demand for non-US safe-haven currencies seen thriving should the situation worsen.

Israel's foreign minister said moves by two Iranian warships to sail through the Suez canal to Syria were a "provocation" by Tehran.

By 5pm, the NZ dollar was at US75.47c from US74.44c at 8am and a low of US75.05c overnight.

ANZ bank said solid demand for the NZ dollar had managed to avert a test of the US75c level, although the bounce had been limited as ratings agency Moody's Investors Service announced reviews for the Australasian banking sector.

Moody's placed the big four Australian banks on review for a possible downgrade, saying the review would focus on the Australian banking system's structural sensitivity to conditions in the wholesale funding market.

The kiwi was little changed against the Australian dollar at A75.24c, and briefly dropped to a two-month low of 0.5534 euro around 6am before lifting to 0.5557 at 5pm.

It clawed back against the British pound to reach 46.87p from 46.64p at 5pm yesterday and was little changed at 63.12 yen.

The trade weighted index stayed steady at 67.37 from 67.42.

Meanwhile, J.P. Morgan Chase Bank strategist Junya Tanase said rising inflation in the world had led some investors to speculate there could be a rate hike by the Fed but such expectations were likely to be premature.

"The risk of inflation varies from country to country. In the United States, inflation is still not an imminent risk and US interest rates are starting to tick down. That's capping the dollar," he said.

 

NZPA



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