Kiwi dollar surges to 33 month high vs euro

The New Zealand dollar surged to a new 33-month high against the euro overnight amid fears that a euro-zone debt crisis may spread beyond Greece, and after Greeks rioted over harsh austerity measures, leaving three people dead in a torched Athens bank.

The kiwi peaked around 0.5595 euro shortly before 8am, having climbed from 0.5551 at 5pm yesterday.

Anxious investors sold European stocks and drove up the cost of insuring Greek, Spanish and Portuguese debt against default, while taking refuge in the US dollar.

Moody's put Portugal's credit rating on review for a possible downgrade.

"Contagion fears are driving the market and add to pressure on the euro, as does the ongoing civil unrest in Greece that may make it hard to institute reforms," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.

At the same time, the greenback received a boost from data showing US private sector employers added 32,000 jobs last month.

The NZ dollar continued to fall against the greenback, dropping to a week low around US71.40c early today before regaining some ground to US71.68 by 8am. That was down from the US71.90c at 5pm yesterday as the kiwi continued to fall away from a three-month high US73.25c on Saturday.

Against the Australian dollar, the kiwi was little changed from the local close to be at A79.16c around 8am, while slipping to 67.20 yen at the local open from 67.95. The trade weighted index was 67.88 at 8am from 67.95 at 5pm.

BNZ strategist Mike Jones said the NZ dollar was largely off the radar last night, but it was worth noting the kiwi had held up fairly well so far as the European debt crisis unfolded.

He doubted a speech from Reserve Bank Governor Alan Bollard at 10am today would give a clear steer on whether a rise in benchmark interest rates was likely in June or in July.

The key focus today for the NZ dollar would be the household labour force survey, including the unemployment rate, to be published at 10.45am, Jones said.

That data could influence the timing of a hike in the official cash rate.

- NZPA