NZ dollar drifts lower as US rises

Wednesday 8th December 2010

The New Zealand dollar drifted lower today along with a weakening Australian dollar and weak euro.

By 5pm the NZ dollar was at US75.29c, down from US76.01c at 8am, having peaked around US76.65c early today after climbing from about US75.80c mid-afternoon yesterday.

The US dollar was strong on a day of reports of explosions in North Korea. One or two shells had been fired but had not crossed the border into the South, Reuters reported, citing a government spokesmen in the South Korean capital, Seoul.

A sharp sell-off in US bonds also pushed the US dollar to a seven-month high against the yen. Investors sold US bonds after US President Barack Obama reached an agreement to extend tax cuts for another two years.

But today was a "risk-off" day for the local currency, a dealer said.

Equity markets were mostly weaker in the Asian time zone and the Australian dollar was also weak today.

"The local currency is really just drifting rather than there being any real driving factors," he said.

There is also caution ahead of the Reserve Bank of New Zealand's statement tomorrow. Economists said the monetary policy implications of manufacturing and building data released today were limited.

"On balance, today's data suggests some slight downside risk to our third quarter pick for a 0.2% increase in GDP. We think there is a non-trivial risk of a negative third-quarter GDP print," ANZ economists said.

The Australian dollar fell to be US98.07c at 5pm from US99.04c at the same time yesterday and against it the NZ dollar was little changed at A76.72c form A76.90c yesterday.

The NZ dollar rose to 63.08 yen from 62.84 at 5pm yesterday, and was 0.4786 euro from 0.4842 euro yesterday.

The trade weighted index was 68.20 at 5pm from 68.50 yesterday.

NZPA

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