Dollar lower on increased risk aversion

The New Zealand dollar stepped lower today when risk aversion increased.

The culprit this time was a report that China plans to tighten capital requirements for banks to curb the record lending that has fuelled a 60 per cent rise in the nation's stock market.

The speculation caused interest rate markets to rally and risk currencies to sell off, said Lloyd Cartwright, head of financial markets at Westpac Institutional Bank.

A Reuters interview with Prime Minister John Key in Sydney published late this afternoon was also being absorbed by traders. Mr Key said there was no need to raise interest rates now and the NZ dollar was a bit of a barrier to a recovery.

By 5pm the NZ dollar was at US67.17c, down from US67.45c at the same time yesterday.

It had traded in a relatively narrow range in the overnight session prior to today's open.

The local sharemarket was weaker today, reflecting weakness in the Australian sharemarket following a selldown of part of a holding in Telstra by the federal government's Future Fund.

At 5pm the NZ dollar was buying 0.4727 euro, from 0.4743 yesterday, and was 62.82 yen from 63.62.

Against the Australian dollar, the NZ dollar was at A81.70c from A81.20c, while the trade weighted index eased to 62.67 from 62.85 yesterday.

Currency rates:

NZ dlr/US dlr US67.17c US 67.45c

NZ dlr/Aust dlr A81.70c A81.20c

NZ dlr/euro 0.4727 0.4743

NZ dlr/yen 62.82 63.62

NZ dlr/stg 40.89 40.78

NZ TWI 62.67 62.85

Aust dlr/US dlr 82.16 83.01

Euro/US dlr 1.4210 1.4227

US dlr/yen 93.52 94.39

- NZPA