The New Zealand dollar fell against all major currencies last night as investors returned to stock markets with gusto and largely ignored trading in the kiwi.
The currency recently traded at 83.21 US cents, down from 83.62 cents yesterday, and fell to 71.31 on the trade-weighted index of major trading
partners' currencies from 72.09 previously.
Investor sentiment received a clear risk-on signal yesterday after official figures from Japan showed growth contracted 0.3 per cent in the second quarter, beating expectations and suggesting the world's third-biggest economy was recovering faster than previously thought from the March earthquake and tsunami.
The Australian dollar climbed to US$1.0503 from US$1.0413 yesterday, its highest level since before the recent global equity rout. The rush into the Australian currency put pressure on the New Zealand dollar, with the light volume of kiwi dollar trading meaning it underperformed on the cross-rates.
"A lack of liquidity in the kiwi means you can get these strange moves sometimes," said Mike Burrowes, a market strategist with Bank of New Zealand. "Investors moved strongly into Australian dollar, which has a lot more liquidity that we do, and sometimes those positions can be quite large. That's not a problem for them but it is a problem for the kiwi."
