NZ dollar dips, volatility expected to continue

The New Zealand dollar fell today when the Australian dollar came under pressure.

The NZ dollar fell to US67.39c by 5pm, after rising to US67.97c at 8am from US67.58c at 5pm yesterday.

Danica Hampton, senior currency strategist at BNZ, said the world felt like a better place after equity markets rallied on Friday but headlines about miner Rio Tinto in Australia today increased negative sentiment for the Australian dollar.

Rio Tinto is reviewing all capital spending plans in light of the Australian government's proposed resource super profits tax.

The NZ dollar rose as high as A81.90c today but eased to A81.27c by 5pm, compared to A81.24c at 5pm on Friday.

The Australian dollar had fallen sharply last week and investors are continuing to flee the currency as part of a flight to quality at a time of uncertainty in markets. It was US82.86c at 5pm from US83.19c at the same time on Friday .

Ms Hampton said the performance of equity markets would continue to be a major driver of sentiment in financial markets this week.

Westpac expects the NZ dollar to continue to have a downward bias until stability returns to markets.

"Picking currency direction at present is an exercise in predicting the next eurozone shock," Westpac said.

The NZ dollar was at 60.77 yen at 5pm after opening at 61.16 yen from 60.89 yen at 5pm Friday.

The NZ dollar was 0.5385 euro at 5pm from 0.5350 on Friday and 46.53p from 46.86p on Friday.

The trade weighted index was 65.31 at 5pm from 65.25 on Friday.

- NZPA