NZ dollar drifts lower in quiet trade

The New Zealand dollar eased slightly today as equity markets weakened on renewed fears about the strength of European banks.

By 5pm, the NZ dollar was buying US71.70c from US71.94c at 8am and US72.32c at 5pm yesterday. It fell to A78.56c at 5pm from A78.94c at 8am and A79.10c yesterday.

"We have drifted off against the aussie and other currencies. We were probably too high on opening," one dealer said.

There was no local economic data of note to move the markets so investors focused on equity markets which were rattled by a Wall Street Journal report that said stress tests published more than a month ago underestimated some lenders' holdings of potentially risky government debt.

However, shortly before the local session ended Treasury revealed that the cost of the earthquake in Christchurch could be as high as $4 billion, double the original estimate.

The Australian dollar performed better and was underpinned by gains on a battered euro. The euro struggled near record lows.

The Australian dollar was not affected by data which showed the number of mortgage commitments rising 1.7 per cent in July, much as expected.

The Australian dollar was at US91.25c at 5pm from US90.45c at the same time yesterday.

BNZ market strategist Mike Jones said when Julia Gillard was announced as prime minister, the knee-jerk response was to sell the aussie, but the losses were relatively short-lived.

Mr Jones said it "recovered some of its losses with the reduced political uncertainty and yesterday's marginally more hawkish than expected Reserve Bank of Australia statement no doubt providing some support".

The RBA left rates on hold at 4.5 per cent as expected, as inflation posed few problems and the global outlook remained uncertain.

Against the "safe-haven" yen, the NZ dollar also dropped to 59.82 yen at 5pm today from 60.83 at the same time yesterday. It was little changed at 0.5641 euro from 0.5652 yesterday.

The trade weighted index fell to 66.73 at 5pm from 67.21.

- NZPA