NZ dollar fluctuates overnight

The New Zealand dollar dived, soared and then dived again in a night of wild swings. From US67.80c at 5pm yesterday, the kiwi fell to US67c, then rose to US68.40c, before falling to US67.60c by 8am today.

The euro fell to a fresh four-year low against the United States dollar on signs the euro zone's debt crisis was spreading to its banking system.

The European Central Bank has warned that euro zone banks face up to 195 billion euros in a "second wave" of potential loan losses over the next 18 months due to the financial crisis.

The ECB said it had increased purchases of euro zone government bonds. Stronger-than-expected US manufacturing and construction spending encouraged some investors to briefly leave the perceived safety of the US dollar and yen, though the positive sentiment waned as the global session wound down in New York.

Meanwhile, Canada became the first of the G7 major industrialised countries to hike interest rates following the global financial crisis, raising its key rate by a quarter point to 0.50 per cent.

The Australian dollar slipped against the greenback after the Reserve Bank of Australia left Australia's benchmark rate unchanged at 4.5 per cent as expected. The kiwi rose to A81.16c at the local open from A80.81c at 5pm, shortly after the Australian rate announcement.

The NZ dollar also climbed as high as 0.5565 euro overnight, but fell away to 0.5525 at 8am, little different from the level at 5pm. By the local open the kiwi was lower against the Japanese currency at 61.55 yen, after being at 61.81 yen at 5pm, then climbing to 62.40 yen during the night.

The trade weighted index fell to 65.88 at 8am from 65.99 at 5pm.

BNZ strategist Mike Jones said a 3.5 per cent fall in the composite dairy index at Fonterra's online auction overnight broadly matched expectations.

The result was not a bad one given the ramp up in US and European supply, along with sharp falls in prices for oil and other global commodity prices. Dairy prices were still 84 per cent above year ago levels. NZPA WGT Reuter mjd kn