Kiwi falls from 11-month high as ECB talks up greenback

Friday 8th October 2010

The New Zealand dollar fell from an 11-month high after the European Central Bank President took a crack at "disorderly" currency moves and threw his support behind a strong greenback.

The kiwi pushed near 76 US cents yesterday after unexpectedly upbeat employment data across the Tasman took the Australian dollar to a post-float high of 99.17 US cents, and stoked support for it to reach parity with the greenback.

That euphoria was sapped as traders took advantage of the trans-Tasman currencies' rapid gains, while the ECB's Jean-Claude Trichet told an International Monetary Fund meeting in Washington currency levels should reflect economic fundamentals, and complained about the sharp fall in the US dollar.

That comes ahead of IMF and World Bank meetings in Washington this weekend, where traders will be watching to see what policy makers have to say about volatility in the foreign exchange markets.

"The markets have got increasingly nervous with the IMF and World Bank meeting in Washington - there's a lot of rhetoric around unease over the movements in currency markets," said Khoon Goh, ANZ Bank's head of market economics and strategy.

"What's clear from the price action is that the kiwi is getting dragged up reluctantly with the Australian dollar, which is reflective of the weak fundamentals in New Zealand."

The kiwi fell to 74.95 US cents from 75.58 cents yesterday and dropped to 66.73 on the trade-weighted index of major trading partners' currencies from 67.11. It declined to 61.74 yen from 62.47 yen yesterday, and slipped to 76.32 Australian cents from 76.45 cents.

It decreased to 53.84 euro cents from 54.06 cents yesterday, and was down to 47.20 pence from 47.46 pence.

Goh said the currency may trade between 74.60 US cents and 75.30 cents today ahead of American employment data today.

Markets will be looking for a 75,000 jobs gain from America's private sector labour market when non-farm payroll data comes out in the US Traders are wary of another weak result, which would sap investors' appetite for the greenback.

Businesswire.co.nz

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