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Kiwi restrained after tumble on double-dip comments

Thursday 10th February 2011

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The New Zealand dollar fell further against the euro, and was able only to retrace a little of the ground it lost yesterday after Finance Minister Bill English spoke about the possibility of a double-dip recession.

By 8am the kiwi was buying US77.27c against the greenback from US77.13c at 5pm, while falling to 0.5629 euro from 0.5652.

The US dollar was broadly weaker after Federal Reserve Chairman Ben Bernanke said US unemployment remained too high, suggesting the Fed would push on with its US$600 billion (NZ$816 billion) stimulus programme.

Traders cited talk of euro buying by central banks in Russia and South Korea, to diversify their reserves, as a reason for a broad rise by the European currency.

BNZ currency strategist Mike Jones said the NZ dollar was "blindsided" yesterday by the downbeat comments from English.

Overnight, currency markets struggled for direction somewhat, he said.

A mild cooling in investors' risk appetite tended to dampen demand for growth sensitive currencies such as the NZ and Australian dollars.

A bout of profit taking had seen global equity markets post modest losses, while sentiment generally lost some steam after Ireland announced it would postpone capital injections into its banks, Jones said.

The kiwi rose to A76.33c at 8am against the Australian dollar from A76.08c at 5pm, and edged up to 63.67 yen from 63.56. The trade weighted index was 68.49 at 8am from 68.51 at 5pm.

ANZ bank said today's focus should be squarely on Australian employment data to be published this afternoon. In the meantime, NZ dollar moves would follow those of the aussie, with the topside being limited.



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