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NZ dollar little changed as investors focus on Aussie

Wednesday 12th January 2011

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The New Zealand dollar was little changed today, while investors in Australia weighed the impact of the floods raging through Queensland against strong economic data.

Around 5pm the NZ dollar was at US75.92c, unchanged from 8am and up from US75.86c at 5pm yesterday.

The Australian dollar was firm at US98.54c at 5pm from US98.46c at the same time yesterday. Dealers said strong home loan and job vacancy data countered concerns about the impact of the floods.

Imre Speizer, senior market strategist for Westpac, said that the NZ dollar may decline to around US70c in the first few months of the year due to the strength of the US dollar.

But the New Zealand economic recovery will capture market attention and this could see the NZ dollar pass the previous post-float record high of US82c set in February 2008.

"Key drivers of growth will be stronger New Zealand commodity prices and low interest rates, as well as one-off factors such as the Canterbury earthquake reconstruction and the Rugby World Cup. We forecast GDP growth to exceed 4% in 2011," he said.

A stronger recovery in 2011 will see a rise in the official cash rate and flow through to lifts in mortgage interest rates. Higher interest rates will attract NZ dollar investors, pressuring the dollar higher.

The NZ dollar bottomed at a decade low against the aussie around A73.85c just before Christmas. It was at A77.02c at 5pm today from A77.01c at the same time yesterday.

The NZ dollar was at 63.10 yen at 5pm from 63.23 yen at 8am and 63.03 at 5pm yesterday.

The trade weighted index was 68.95 at 5pm from 68.99 yesterday.



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