NZ dollar recovers some of plunge

The New Zealand dollar had an extremely volatile session absorbing the fallout from the huge fall in US equities just before this market opened.

"It has been a bit of a roller coaster after the movements in the equity markets," said Murray Hindley, ANZ's chief foreign exchange dealer. "The range has been big," he said.

The NZ dollar traded as low as US70.20c just before this market opened when US stocks plunged suddenly and briefly by more than 9 per cent before pulling back to a near 3 per cent drop. Some reports were blaming a trading error at a major firm for the sharp dive. It traded as high as US71.49c as Asian sharemarkets rallied off lows before settling at US71.16c at 5pm from US72.67c at the same time yesterday.

It was a stark contrast to Thursday when the NZ dollar charged up to a peak around US72.75c on the back of stunning job figures and a speech by Reserve Bank Governor Alan Bollard.

Investors spent today watching another source of uncertainty -- the results of the UK election where a hung parliament was looking likely.

The NZ dollar eased against the Australian dollar after the Reserve Bank of Australia's quarterly statement on policy was upbeat about the economic outlook. It was at A79.94c at 5pm from A80.20c at 5pm yesterday, which is off its recent four-month peak of A80.74c.

Currency markets were optimistic about reports that US Treasury Secretary Timothy Geithner will discuss efforts to get aid to debt stricken Greece with G7 finance ministers on Friday.

The NZ dollar reached its highest level in nearly three years at 0.5705 euro on Thursday night, but by 5pm had fallen to 0.5603, below its level of 0.5667 at 5pm yesterday.

The NZ dollar was also down to 64.17 yen at the local open from 68.25 at 5pm yesterday but recovered to be 65.56c yen by 5pm today.

As Britons contemplated a hung parliament, the NZ dollar rose to 48.23p at 5pm from 48.09p at the same time yesterday. The NZ dollar has been climbing against the British currency for much of the past 14 months, from a level around 34.50p.

The trade weighted index was 67.76 at 5pm from 68.87 yesterday.

- NZPA