NZ dollar falls then rises as Aussie dollar soars

The New Zealand dollar fell today on a dovish Reserve Bank of New Zealand Monetary Policy Statement (MPS) but recovered from its lows as the Australian dollar soared on strong employment data.

The NZ dollar was at US74.90c at 5pm from US74.83c at 8am and US75.29c at 5pm yesterday. It fell from around US75.05c to US74.35c on the MPS then recovered.

Still it could not keep up with the Australian dollar and was worth A75.91c at 5pm, down from A76.51c from at 8am and A76.72c at 5pm yesterday. While the Australian dollar rose to be US98.63c at 5pm from US97.86c at 8am.

The RBNZ surprised no one when it kept the official cash rate (OCR) at 3 per cent but it said aggregate activity was weaker than expected in the June quarter and forward indicators of growth had softened in recent months.

ASB bank chief economist Nick Tuffley said the big change in the statement was in how the RBNZ was viewing the effectiveness of interest rates on activity. It had been surprised during the past three months at the lack of traction from current low rates.

Looking back over the last month, BNZ said that nerves have nobbled a NZ dollar rally that took the currency to a 30-month high near US80c early in November.

The slide in the NZ dollar reflected changes in risk appetite, interest rate differentials and commodity prices.

"As we move towards year-end we continue to hold the view the balance of risks around the NZ dollar outlook are tilted towards the downside. As always though, reduced trading volumes and position squaring around this time of year have the potential to spur higher than usual currency volatility," BNZ said.

The Australian dollar soared after Australian employment surged 54,600 in November, surpassing expectations of 19,0000 and the unemployment rate fell to 5.2 per cent from 5.4 per cent.

The US dollar lost steam today but has been strong.

The NZ dollar dipped to 62.77 yen from 63.08 yen at the same time yesterday, and was 0.4734 euro from 0.4786 euro yesterday.

The trade weighted index was 67.62 at 5pm down from 68.20 yesterday.

- NZPA