Kiwi dollar on back foot as markets open

Photo / Dean Purcell

The New Zealand dollar started on a fairly modest footing as currency markets opened, after flirting with US80c early last week.

By 8am the NZ dollar was buying US77.24c down from US77.52c at 5pm Friday and well below US77.98c at 8am Friday.

Against the European currency the NZ dollar was trading at 0.5651 down from 0.5692 Friday evening.

The NZ dollar had "crashed back to earth" after global risk appetite soured and falling NZ/US interest rate differentials knocked it back below US77.50c, BNZ strategist Mike Jones said.

"Not only did the European sovereign debt crisis storm back onto markets' radar following Irish difficulties with fiscal austerity, but global growth sentiment was further dimmed by worries about Chinese policy tightening," he said.

The evolving crisis in New Zealand's kiwifruit industry added to the near-term downside risks on the NZ dollar, as the latest reports indicated the vine-killing PSA disease had continued to spread through North Island kiwifruit vines, Jones added.

The G20 leaders' summit on Friday was "fairly underwhelming" and markets had simply ignored the whole affair.

Jones expected the Irish debt saga to continue to take centre stage, with markets on alert for any signs of similar problems in Portugal and Spain.

The NZ dollar was little changed at 63.73 yen at 8am today from 63.81 yen early Friday evening, and A78.44c this morning from A78.04 Friday 5pm.

The trade weighted index fell slightly to 69.00 from 69.17 Friday.

- NZPA