NZ dollar makes up ground vs greenback, yen

Photo / Dean Purcell

The New Zealand dollar made up some ground against the greenback and yen, as the euro rebounded on hopes the European Central Bank (ECB) may take bold steps to ease the region's debt crisis.

By 8am the kiwi was buying US74.95c from US74.28c at 5pm, having dropped to a two-month low around US73.95c early yesterday.

The NZ dollar was also up to 63.15 yen from 62.09, after touching a one-month low around 61.85 yen during early afternoon trading yesterday.

Against the beleaguered European currency, the kiwi was little changed at 0.5713 euro at 8am, after reaching a 2-1/2-month high around 0.5735 euro 24 hours earlier.

The ECB is expected to keep interest rates unchanged in an announcement due tonight, and possibly announce the extension of crisis support measures beyond their expiration in mid-January.

But some market participants think the ECB could disappoint the market given the well-publicised conflict within the bank about buying bonds. That could prompt a resumption of the euro's sell-off in fairly short order, analysts said.

BNZ currency strategist Mike Jones said overnight investors had focused on the positives on a swathe of upbeat manufacturing data out of China, Europe, Britain and the United States.

Recovering risk appetite and rising commodity prices bolstered demand for growth-sensitive currencies such as the NZ dollar, at the expense of safe haven currencies such as the US dollar and the yen, Mr Jones said.

A solid result at last night's Fonterra auction, with dairy prices up 1.6 per cent, may have also helped underpin NZ dollar sentiment.

The kiwi edged lower against the Australian dollar overnight to be at A77.47c at 8am, while the trade weighted index rose to 68.30 from 67.93 at 5pm.

- NZPA