KEY POINTS:
The New Zealand dollar rose to fresh three-week highs against the greenback as the US currency fell broadly, weighed down by worries about the fiscal impact of the US government's US$700 billion ($1.03 trillion) bailout plan.
From US68.69c at 5pm yesterday, the kiwi peaked around US69.50c and at 8am today was buying US69.27c.
The US bailout package, aimed at easing the global credit crisis, is awaiting Congressional approval. It would give sweeping powers to the US Treasury to buy mortgage-related bad debts from financial firms, including US subsidiaries of foreign banks.
Analysts say foreign investors will be increasingly reluctant to finance the growing US deficit at the current US dollar exchange rate and that funding the gap would require higher interest rates and a weaker currency.
While rising against the greenback, the NZ dollar was weaker against a range of other currencies.
By 8am the kiwi was at A81.62c against the Australian dollar from A82.70c at 5pm, having briefly dropped to a week-low below A81.40c. It was down to 0.4665 euro from 0.4739.
The NZ dollar was also buying 72.82 yen at 8am from 73.20, having spiked above 74 yen early today. The trade weighted index was 64.25 at today's local open from 64.60 at 5pm.
Bank of New Zealand currency strategist Danica Hampton said heavy losses in US equities had helped temper gains in the NZ dollar against the greenback.
The slide in US equities and rising risk aversion encouraged some selling of growth sensitive currencies such as the NZ dollar against safe-haven currencies such as the yen.
- NZPA
