Kiwi rises against Aussie amid Euro debt fears

The New Zealand dollar reached a five-week high against its Australian counterpart and a 15-week high against the euro, as fears grow that Europe's debt crisis is spreading.

Markets worried about Spain's commitment to fiscal austerity after the ruling Socialist Party lost in regional elections. Italy suffered a credit outlook downgrade.

That added to worries about Greece. Even with its government pledging to speed up privatisation of state firms, investors worry it may yet have to restructure debt.

BNZ currency strategist Mike Jones said last night's currency movements had been about risk aversion, with commodity prices falling and so-called safe haven currencies, such as the greenback and yen, outperforming.

While the NZ dollar had suffered from the general risk-off sentiment, a much heavier toll had been taken on the Australian dollar.

The kiwi was at A75.24c by 8am, just back from early morning highs and after having climbed through the overnight session from A74.74c at 5pm.

Against the European currency, the NZ dollar stayed in a narrow range, rising from 0.5613 at 5pm to peak around 0.5640 before easing to 0.5627 at 8am.

The NZ dollar was little changed against the US or Japanese currencies at 8am, compared to 5pm, at US79.06c and 64.83 yen.

ANZ bank said the NZ dollar's next significant level against the aussie would be A75.74c. While it did not expect that level to be reached today, it said the kiwi should head higher on the cross.

It expected the European currency's resistance to continue holding today around 0.5640 euro, despite growing issues facing the European Union periphery.