KEY POINTS:
The New Zealand dollar made gains today despite fresh fears of fallout from the global credit crisis and a fall in stocks that prompted investors to avoid risks and unwind carry trades.
Credit worries were renewed after Standard & Poor's cut ratings on Lehman Brothers Inc, Merrill Lynch & Co Inc and Morgan Stanley and said outlooks for the large financial institutions were now predominantly negative.
That came after British mortgage bank Bradford & Bingley said the risk of customers defaulting on loans was rising faster than expected as it slashed the price of its emergency rights issue to secure a private equity lifeline.
"Risk aversion is back. The fear of consumer bankruptcies and much bigger problems in the financial sector in the highly leveraged economies like the US and the UK are weighing on carry trades," said Boris Schlossberg, senior currency strategist at DailyFX.com in New York.
However, the kiwi rose to US78.50c at this morning's opening from US78.07c at Friday's close before the long weekend and and dipped to US78.38c after a dovish Reserve Bank of Australia statement late in the session.
BNZ currency strategist Danica Hampton today said the NZ dollar had been "surprisingly resilient" in the face of better than expected US data and rising risk aversion amid sharp losses in global stock markets.
It seemed the kiwi had been propped up against the greenback by demand for the NZ currency against the Australian dollar, she said.
BNZ suspected demand was fuelled by profit-taking after soft Australian data yesterday and ahead of Australia's interest rate decision. The Reserve Bank of Australia left interest rates unchanged, saying a considerable tightening had occurred via the currency.
Meanwhile, analysts are expecting a much more hawkish statement from the Reserve Bank of NZ on Thursday than had been anticipated before the Government's expansionary budget was announced on May 22.
That likely stance was also putting a floor under the kiwi.
The NZ dollar closed the session was at A82.15c against the aussie, having reached a three-week high around A82.50c early last night. It closed on Friday on A81.67c.
The kiwi also reached a three-week high against the euro, topping 0.5060 early today, and closing on 0.5050 euro, from 0.5028 at 5pm on Friday.
The trade weighted index ended on 69.93 from 69.70 at Friday's close.
Currency rates:
NZ dlr/US dlr US78.38c US78.07c
NZ dlr/Aust dlr A82.15c A81.67c
NZ dlr/euro 0.5050 0.5028
NZ dlr/yen 81.84 82.31
NZ dlr/stg 39.96p 39.50p
NZ TWI 69.93 69.70
Australian dollar US95.46c US95.58c
Euro/US dollar 1.5531 1.5524
US dollar/yen 104.37 105.43
- NZPA
