The New Zealand dollar retreated from its post-float highs yesterday as some semblance of normality returned to trading after the US Government reached an agreement on its debt ceiling.
The retracement, although slight, will be good news to exporters - who have seen the currency appreciate by more than 20 per cent against the US dollar since March - and Reserve Bank Governor Alan Bollard, who last month said the high value of the New Zealand dollar was acting as a drag on the New Zealand economy.
"The main feature of the last 24 hours has been that global risk sentiment has turned to the negative, so that will affect many things - commodities, equities and the high-risk currencies, like the kiwi," Westpac senior market strategist Imre Speizer told the Herald.
The kiwi was trading at US87.68c at 5pm yesterday, after sinking by almost a cent from its post-float high of US88.42c.
Dealers said the market had returned to more "normal transmission", for the time being at least, now that the US House of Representatives had approved legislation to raise the US debt limit by US$2.1 trillion ($2.4 trillion) and cut federal spending by US$2.4 trillion or more, one day before a threatened default.