Concerns persist despite dollar rise

Photo / Herald on Sunday

The New Zealand dollar rose yesterday after a better-than-expected US payrolls report eased anxiety about the global economy.

However, some analysts questioned the strength of the rally, citing the weekend's earthquake as one of a range of negative factors.

The NZ dollar was at US72.13c at 5pm from US71.83c at 8am and US71.40c at 5pm on Friday.

The US dollar eased after the US non-farm payrolls release on Friday showed only 54,000 people lost their jobs in August, instead of the 100,000 predicted.

"We are of the view that this post-US payrolls-led fresh appetite for risk is glossing over events that are collectively NZ dollar negative," said TD Securities. "This current rally is overdone, both against the US dollar and Australian dollar."

The NZ dollar was at A78.68c at 5pm, up from A78.48c at 8am and A78.58c at 5pm on Friday.

TD Securities said the New Zealand economy may be in its second year of recovery but the recovery is fragile and inflationary pressures are some way off. While the cost of the collapse of South Canterbury Finance to the Crown had been provided for the process of selling its assets to recoup Crown losses needed to be closely monitored.

The magnitude 7.1 earthquake on Saturday in Canterbury caused an estimated $2 billion worth of damage.

"While the insurance industry will be assessing damage and reconstruction costs, there will be some pressure on fiscal policy to assist with the rebuilding of public sector goods and services," TD Securities said.

BNZ market strategist Mike Jones said considering the massive disaster, the earthquake had only a relatively minor effect on the currency.

"In fact, the NZ dollar/US dollar closed last week just a smidge below 3 week highs of US72.20c. However, with the full impact of the quake since having dawned on markets, the NZ dollar/US dollar has opened this morning 20 points lower around US71.80c," he said.

- NZPA