Kiwi falls as investors pull back from risky trades

Monday 16th May 2011

The New Zealand dollar dropped to a one-week low against the greenback, as renewed worries about possible euro zone sovereign debt restructuring continued to drive a broad pullback from risky trades in commodities, stocks, and high-yielding currencies.

The euro fell against most currencies, dropping to a six-week lows against the US dollar and the yen on renewed concerns Greece may restructure its debt, while the US dollar rose to a five-week high against major currencies.

European Central bank President Jean-Claude Trichet also contributed to the euro fall as he dampened expectations about interest rate rises in the euro zone by saying that inflation was at it's peak.

From US79.29c at 5pm on Friday, the NZ dollar fell to US78.45c at 8am today, just up from lows around US78.35c reached a little earlier. The kiwi was little changed at 0.5577 euro at 8am, having reached a 12-week high against the European currency above 0.56 euro early on Friday.

ANZ Bank's morning briefing notes said it expected the topside for the NZ dollar to be limited today by a strengthening US dollar, while support levels should be tested further in coming days as markets eagerly awaited the budget on Thursday.

The NZ dollar dropped to A74.24c against the Australian dollar at 8am today from A74.55c at 5pm on Friday, having hit a two-week high A74.85c early on Friday. The kiwi was also down to 63.45 yen at 8am from 63.87 at 5pm on Friday, while the trade weighted index fell to 68.25 at 8am from 68.65.

NZPA

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