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Kiwi drops to three-and-a-half week low against greenback

Tuesday 15th February 2011

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The New Zealand dollar dipped to a 3-1/2-week low against the greenback overnight, after weak New Zealand retail sales data hurt the kiwi yesterday.

Around 8am today the NZ dollar was buying US75.75c, similar to its level at 5pm yesterday, but up from a low around US75.40c earlier today.

ANZ bank said the poor local data and a weakening euro, were factors behind a testing of NZ dollar support levels. A recovery from the lows looked fragile in early morning trading.

The euro slid to a three-week low against the US dollar, dropping below the widely perceived pivotal level of US$1.35.

Ten-year government bond yields for Ireland, Greece, Portugal and Spain were all higher, with the spread to German 10-year government bond yields widening.

The fall in the euro was partly attributed to news about troubled German bank WestLB, which was reportedly preparing to suggest its own break-up to the European Commission to win approval for state aid.

The NZ dollar managed a small gain against the European currency, lifting to 0.5620 euro at 8am from 0.5598 at 5pm, and was little changed at 63.09 yen.

Against the Australian dollar, the kiwi dropped to its lowest level in seven weeks around A75.20c, while spending most of the overnight session in a tight range between A75.30c and A75.50c. The trade weighted index edged up to 67.74 at 8am from 67.67 at 5pm.

ANZ said an unsettled feeling for the NZ dollar should continue through today's trading.

Reserve Bank of Australia board meeting minutes and Chinese inflation data due this afternoon would guide the NZ dollar and ensure support remained intact, ANZ said.



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