Kiwi drops below US 70c

Friday, 08 August 2008

August 08 – Close: The New Zealand dollar broke through support levels to below US70c for the first time in nearly a year today and dealers are calling it lower.

The New Zealand dollar recovered to US70.18c by 5pm after dropping to US69.83c in afternoon trading. It closed yesterday at US71.80c.

John Body, head of markets at ANZ, said a broad-based recovery in the US dollar was the reason for the move and the New Zealand and Australian dollars and euro were all affected.

"We broke through relatively key levels around US70.50c and that triggered the move lower," he said.

The New Zealand dollar had three things working against it -- expectations of lower interest rates in Australia and New Zealand, lower commodity prices and the strength in the US dollar.

"Put the three together and it is quite compelling case for kiwi weakness," he said.

Against the yen, the kiwi slumped to 76.95 from 78.68 yesterday. Against the euro, the NZ dollar moved from 0.4650 at yesterday's local close to 0.4610 at 5pm.

The US currency was bolstered by a surprise rise in June home sales and diminished expectations for euro zone interest rate increases.

The gain in pending home sales offset a bleak US jobless claims report, supporting a growing view that the current US housing slowdown may be nearing a bottom. The data backed expectations of US rate hikes this year, which has fuelled a rebound in the greenback over the past two weeks.

The kiwi eased against the aussie, closing locally today at A78.40c from A78.85c at 5pm.

The trade weighted index was 64.29 at 5pm from 65.25.

NZPA