NZ dollar eases from new post-quake high

File photo / NZH

The New Zealand dollar rose to levels not seen since the devastating February 22 earthquake hit Christchurch but was knocked back by news that business confidence has plunged since the earthquake.

The NZ dollar was at US75.82c at 5pm. It peaked at US76.37c around 6am, having climbed from US75.78c at 5pm yesterday.

News that business confidence plunged in the March National Bank Business Outlook survey knocked the currency from just above US76c to below the figure.

"The risk that the trauma and disruption from the earthquake spilled over into broader nationwide confidence was one of the main reasons the Reserve Bank of New Zealand (RBNZ) cut the official cash rate by 50 basis points earlier this month," Philip Borkin at Goldman Sachs & Partners New Zealand Ltd said.

"Therefore, we feel the RBNZ will feel somewhat vindicated by today's weak confidence numbers. However, we emphasise that the weak numbers should not be interpreted as evidence for possibly more monetary policy stimulus. The RBNZ explicitly stated that its decision to cut was a pre-emptive move," he said.

Private sector credit data today also showed that household deleveraging continues.

BNZ currency strategist Mike Jones said that growth sensitive currencies, such as the NZ dollar, outperformed overnight as global investors continued to rediscover an appetite for risk.

Labour market data in the United States impressed and there had been no further deterioration in the Japanese nuclear crisis or evidence of wider contagion from Portugal's recent debt woes, Mr Jones said.

The NZ dollar also rose to its highest level against the Japanese currency since February 22, peaking at 63.36 yen, after climbing from 62.91 yen at 5pm. It eased to 62.65 yen at 5pm.

The NZ dollar fell to 0.5365 euro after reaching a four-week high 0.5425 euro in overnight trading. It was 0.5378 euro at 5pm yesterday.

The Australian dollar climbed to a fresh 29 year high today. The NZ dollar eased to A73.48c at 5pm after rising to a two-week high at A73.95c on Wednesday night from A73.49c at the same time yesterday.

The trade weighted index fell to 66.47 at 5pm from 66.56 yesterday.

- NZPA