Dollar bounces overnight

The New Zealand dollar briefly dropped below the US68c level early today, but then lifted quickly by around half a cent.

By 8am the kiwi was buying US68.66c, up from US68.25c at 5pm yesterday.

BNZ Capital senior strategist Danica Hampton said that early on, fears about the global outlook put the NZ dollar under selling pressure.

Media reports suggesting Chinese state owned enterprises may terminate commodity contracts weighted heavily on equity and commodity prices, she said.

Investors were quick to ditch growth sensitive currencies such as the NZ dollar in favour of the relative safety of the US dollar. Japanese election results also helped support the yen, adding to downward pressure on the kiwi against the yen.

But the NZ dollar's weakness against the greenback was short-lived, with stronger than expected US manufacturing data helping lift investor sentiment a little, said Hampton.

The euro also spiked against the US currency, paving the way for a more generalised wave of US dollar selling.

Yesterday's "unequivocally buoyant" National Bank Business Outlook probably helped underpin NZ dollar sentiment, she said.

By 8am the NZ dollar was up to 0.4789 euro from 0.4778 at 5pm, and was also up to 63.88 yen from 63.28.

Against the Australian dollar the kiwi was little changed at A81.19c by the local open, while the trade weighted index rose to 63.51 at 8am from 63.30 at 5pm.

- NZPA