By ELLEN READ
The dollar has clawed back some of the losses suffered after rumours of foot and mouth disease in New Zealand.
After falling almost 1.5c to 57.20USc, the kiwi bounced back to 58.70USc overnight on Thursday before settling around 58USc at 5pm yesterday.
The slump followed a foot and mouth rumour which surfaced on British financial markets on Wednesday night. Later there was news of a possible case of "variant" Creutzfeldt-Jakob disease (vCJD) affecting a Waikato man.
"The market has started to discount the rumours but it will take a while for the nerves to abate," said ANZ head of foreign exchange John Body. "Markets don't mind a bit of bad news but they hate uncertainty."
Westpac currency strategist Johnathan Bayley said the market's concern was valid as a worst-case scenario would have serious consequences for the economy.
"However, New Zealand is still a number of serious ifs away from a worst-case scenario, thus it is important to put the case in context.
"There is a single patient who may have CJD and even if he does then it will not necessarily be the CJD variant (vCJD) linked to BSE.
"If it is determined that New Zealand has a case of vCJD, it will still be uncertain, and we believe unlikely, that it has come from the domestic beef herd, rather than imported product."
But markets enjoyed rumour and trade uncertainty so speculation was likely to weigh on the kiwi until test results were known. While the kiwi rebound was mainly due to a calming of nerves, Body said strong employment data out on both sides of the Tasman also helped.
"It suggested the Australasian economies are both surging along despite the global slowdown, a situation which would discount fears of further rate cuts leaving the yield advantage intact."
Dollar gains as rumour fades
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