Dollar gains from six-year low as US stocks pare losses

Tuesday 3rd February 2009

The New Zealand dollar rose from a six-year low as US stocks pared their losses, helping lift the risk appetite of investors for higher yielding or riskier assets.

The Dow Jones Industrial Average closed overnight down 0.8% at 7936.83, having slipped as low as 7876 earlier. Shares on Wall Street clawed back after figures showed manufacturing picked up in January, while still remaining in contraction. Shares had dropped earlier after Moody's Investors Service cut the credit ratings of UK bank Barclays Plc.

"We've seen a bit of a recovery in risk appetite," said Danica Hampton, currency strategist at Bank of New Zealand. Still, "it's premature to think the world is suddenly a better place" with global data and central bank actions "unlikely to inspire much confidence about the global outlook."

The kiwi dollar traded at 50.24 US cents from 50.01 cents late yesterday. The kiwi earlier fell to 49.82 cents, the lowest since 2002.

It was little changed at 79.67 Australian cents, from 79.72 cents, before an announcement from the Reserve Bank of Australia which is expected to slash its benchmark interest rate by 100 basis points to 3.25%

The New Zealand dollar traded at 44.90 yen from 44.44 yen and slipped to 39.15 euro cents from 39.35 cents.

In New Zealand this week, figures are expected to show the unemployment rate climbed to a five-year high of 4.7% in the fourth quarter, as companies trim jobs in response to a drop in demand. Some economists predict the central bank will reduce the official cash rate as low as 2% this year.

By Jonathan Underhill

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