NZ dollar rises as US dollar recovers on yen intervention move

File photo / NZH

The New Zealand dollar spiked higher today as the US dollar surged against the yen on news that the Group of Seven (G7) is intervening in markets to stem a rise in the yen after the Japanese earthquake.

The NZ dollar rose to be US72.96c at 5pm from US71.81c at 8am and US72.23c at 5pm yesterday. The Australian dollar also rose to US99.42c at 5pm from US97.98c at the same time yesterday.

Yesterday morning the NZ dollar plunged from US72.80c to a 6-1/2-month low around US71.20c, as the greenback hit a record low of 76.25 yen.

The US dollar rose to be 81.78 yen at 5pm from 79.20 yen before the move today.

"This is quite unusual for the G7 to come out with a statement indicating a joint intervention," said Daniel Bell, senior dealer at HiFX.

"The US dollar is strengthening against the yen and the carry trade currencies like the NZ dollar and Australian dollar are being dragged up," he said.

The yen had risen strongly since last week's catastrophic earthquake and tsunami, as Japanese investors and insurers were expected to repatriate funds. Investors also closed long positions in higher-yielding, riskier assets such as the Australian and NZ dollars, putting them under pressure.

The G7 nations agreed on Friday to jointly intervene in the currency market to stem a sharp yen.

"Given yen moves after the tragic events that hit Japan, the United States, Britain, Canada and the European Central Bank have agreed with Japan to jointly intervene in the currency market," Finance Minister Yoshihiko Noda told reporters.

The NZ dollar rose to 59.66 yen at 5pm from 56.78 yen at 8am and 57.08 yen at 5pm yesterday.

The trade weighted index rose to 64.42 from 63.88.

- NZPA