Dollar strengthens

Tuesday 21st December 2010

The New Zealand strengthened overnight as global commodity prices managed modest gains and the troubled euro fell further.

The New Zealand dollar rose to US74.30c at 8am from US73.64c at 5pm, and was up to 0.5661 euro from 0.5516, and lifted to 62.20 yen from 61.89.

The kiwi also squeezed up against the Australian dollar, pulling away from a decade low near A74.20c yesterday afternoon to be at A74.78c at 8am today. The trade weighted index rose to 67.27 from 66.95 at 5pm yesterday.

BNZ currency strategist Mike Jones said the NZ dollar was the strongest performing currency yesterday and overnight, although currency movements in general were pretty lacklustre overnight.

The kiwi managed to shrug off general downbeat sentiment, while demand for commodity-linked currencies such as the NZ and Australian dollars was bolstered by modest gains in global commodity prices.

Solid real buying of the NZ dollar against the euro also underpinned the currency

ANZ said support from multiple quarters for the NZ dollar was seen on shallow dips. Overnight, Australasian demand came through during the early European session before knocking up against technical resistance.

The euro fell against the US dollar and hit a record low versus the Swiss franc, with more losses likely as markets were hit by fears of further ratings downgrades of debt-stricken euro zone countries and banks.

Moody's Investors service said it may cut the ratings on some Spanish banks following its multi-notch downgrade of Ireland's credit rating last week. Speculation has risen that France and Belgium may also face possible cuts.

"Credit ratings are eroding across much of the common currency zone as debt continues to increase and economic growth remains anaemic," said Karl Schamotta, senior market strategist at Western Union Business Solutions, in Victoria, British Columbia.

NZPA

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