NZ dollar drifts off after early lift

The New Zealand dollar drifted lower during the day after a morning spike on weekend media reports suggesting Eurozone members had worked out a bailout for Greece.

The kiwi, which stood at US69.98c at 5pm on Friday, rose to about US70.80c this morning but finished today's local session at US70.15c.

"It has been an up and down day," Westpac markets economist Michael Gordon told NZPA.

"The kiwi started off strongly early in the morning after reports that the European nations had apparently agreed to a rescue package for Greece. That would have been a significant development if confirmed ...

"But since early morning the currency has been drifting lower, because even if the market was turning away from Greece it was turning towards the UK and US instead, after a couple of rating agencies said those countries need to do more to get their budget deficits in order. Otherwise their triple A credit ratings may be under threat in coming years."

The moves in the kiwi reflected how it was affected by market sentiment - positive news about Greece initially boosting it but negative news about the United States "strangely" helping the US dollar as a safe haven currency, Mr Gordon said.

ANZ economists said in a market commentary that suggestions from Chinese officials they were not considering revaluing their currency or tightening policy in the near future was good news for "carry currencies" - particularly the Australian dollar and less so the New Zealand dollar.

They said the kiwi continued to be sidelined, "swamped by global events".

"Carry remains a key theme in FX markets, but this is not proving to be a significant benefit to the NZD, particularly in relation to the AUD. Not only are Australian policy rates higher, but regulatory changes have driven a wedge between the rates available to local and offshore investors."

Carry trades involved buying a high interest yielding currency and selling a low yielding currency.

But the kiwi actually gained against the aussie today, rising to A76.79c from A76.63c at 8am and A76.38c at 5pm Friday.

Compared with its Friday closing level, the NZ dollar at 5pm today was barely changed at 0.5108 euro but slighty firmer at 63.60 yen.

The trade weighted index rose to 64.70 from 64.61 on Friday.

- NZPA