KEY POINTS:
The New Zealand dollar consolidated against the American greenback today, following its Labour weekend hammering.
At 4pm today the New Zealand dollar was buying US54.38c and ANZ head of foreign exchange trading Tony Allen said the kiwi found support just above the 54c mark.
A lot of money was "going back home" to the perceived safe havens of the US dollar and Japanese yen, he said.
"It's simple stuff. It's really going to follow the equity markets and emerging markets from now on in."
Mr Allen said people should look to the Australian dollar, Korean wan, and eastern Europe and Latin America to see how the kiwi performed.
Over Labour weekend the NZ dollar hit a 5-1/2-year low against the greenback and a seven-year low against the yen as investors pulled out of assets seen as risky amid fears of global recession.
The kiwi's biggest plunge came over a period of about 12 hours on Friday when it dived from a little under US60c to around US55.30c, and from about 58.60 yen to near 50 yen.
The BNZ Markets Outlook said risk aversion saw investors bail out of growth sensitive currencies like the NZ dollar in favour of relatively safe currencies such as the US dollar and yen.
In the near future the fortunes of the kiwi were expected to remain tied to the global outlook and risk aversion.
And according to ASB Business Weekly the kiwi's US dollar bull run was still the dominant theme, with the big dollar continuing to outperform all but the yen.
There would be a point in this current down cycle where the downside momentum reversed for a while in a sizeable correction upward.
Potential currency movers from the US this week were information coming out on new home sales, home prices, consumer confidence, the Fed's interest rate decision, durable goods orders, economic growth, jobless claims and consumer confidence.
In the medium term ASB expected the NZ dollar to remain weak against the greenback into 2009.
"We have adjusted our NZD forecasts down to reflect the expectation of a lower growth profile for the global economy. We expect the NZD to trade around US$0.55 in early 2009, before recovering back towards 0.57-0.61 over the second and third quarters of 2009."
Currency rates:
NZ dlr/US dlr US54.38c US58.55c
NZ dlr/Aust dlr A89.91c A89.35c
NZ dlr/euro 0.4384 0.4580
NZ dlr/yen 50.73 55.95
NZ dlr/stg 35.07p 36.50p
NZ TWI 55.13 59.19
Australian dollar US60.54c US65.58c
Euro/US dollar 1.2407 1.2786
US dollar/yen 93.28 95.99
- NZPA
