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Kiwi pushes to two-month high against greenback

Wednesday 2nd February 2011

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The New Zealand dollar rose to its highest level against the greenback in more than two months, backed by rising commodity prices and as fears eased that Egypt's political unrest could spread.

By 8am today the NZ dollar was buying US77.97c, having peaked around US78.20c a few hours earlier and up from US77.42c at 5pm yesterday.

The kiwi was weaker against the Australian dollar at A77c by 8am from A77.36c at 5pm, while being little changed at 0.5640 euro and 63.45 yen.

BNZ analyst Kymberly Martin said both the NZ dollar and the aussie outperformed overnight, supported by a strong commodities backdrop.

The ANZ New Zealand commodity price index, which tracked world prices for this country's major export commodities, rose 3.8% last month from December, to another record high. World prices were now up 27% from a year earlier.

That was followed by a strong result from the fortnightly Fonterra milk price auction overnight, which showed a further 7.2% surge in milk prices, following already strong gains this year. Prices were now up 16% to date this year.

The Australian dollar was also boosted by commodity price data, with comments from the Reserve Bank of Australia also weighing on the kiwi during the past 24 hours.

The RBA held rates and, while noting temporary adverse economic effects of recent floods, was quite positive about the economic outlook.

Reuters reported that easing fears Egypt's political unrest would spread in the Middle East helped boost the euro and higher-yielding currencies such as the Australian and NZ dollars.

The US dollar came under broad pressure as safe haven demand fell.

The US manufacturing sector grew at its fastest pace in nearly seven years in January, adding to evidence that economic recovery is gaining traction. Separate data showed a fall in Germany's jobless rate and an acceleration in euro zone manufacturing activity.

"The G-7 countries are continuing to pull out of the recession," said John Doyle, foreign exchange strategist at Tempus Consulting in Washington. "It's a good thing for the global economy. But at the same time, we're seeing an increase in risk appetite on the back of those numbers and that's weighing on the US dollar."



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