NZ dollar begins to recover

The New Zealand dollar today recovered some of a fall to its lowest level in a decade against the Australian currency during the weekend, and managed to stay above US75c against the greenback.

By 5pm today, the NZ dollar was at A73.92c against the Australian dollar, having risen to A74.19c during the session from A73.89c at 8am.

It fell from A74.07c at 5pm on Friday to A73.65c - the lowest since September 2000 - during the weekend.

Against the US dollar, the NZ dollar was at US75.07c at 5pm, little changed from US75.05c at 8am and US75.08c at 5pm on Friday. This compares with a post-quake low around US74.25c last Thursday morning.

"New Zealand's economic fundamentals, including consumer and business confidence, are now clearly weaker since last week's earthquake," Westpac said in its weekly foreign exchange commentary.

Gross domestic product could easily be negative in the first quarter, though Westpac is currently forecasting a 0.1 per cent rise in the quarter.

Westpac is predicting that the Reserve Bank of New Zealand (RBNZ) will cut the official cash rate by 50 basis points to 2.5 per cent on March 10 and said this will reduce the spread between New Zealand and United States interest rates.

However, Statistics New Zealand today revealed an improvement in New Zealand's terms of trade and Westpac cited global food commodity prices as a positive factor for the economy.

Business confidence improved in the latest National Bank survey of business released today, but the survey was taken before the earthquake.

Other market concerns include the politician situation in Libya and China's growth rate.

In an online chat with Chinese citizens, Premier Wen Jiabao said China was slightly lowering its annual economic growth target, to 7 per cent from 8 per cent, in a move that signals a shift in government priorities to put the breakneck economy on a more sustainable footing.

The US dollar has broadly rebounded against other currencies, including the euro, helped by a retreat in oil prices after Saudi Arabia stepped up crude supply. The inverse relationship between the greenback and oil strengthened last week.

Uncertainty over the situation in the Middle East and Africa remains high as investors fear the uprising in Libya could spread to other oil-producing countries. A spike in energy prices could weigh on US consumer spending and crimp global economic growth.

The NZ dollar rose to 0.5462 euro by 5pm from 0.5459 at 8am and 0.5431 at 5pm on Friday, while it was 61.31 yen from 61.51 yen on Friday.

The trade weighted index was at 66.45 at 5pm from 66.38 on Friday.

- NZPA