NZ dollar slips overnight

Photo / Dean Purcell

The New Zealand dollar fell as ongoing unrest in Egypt and rising inflation in Europe sapped investors' appetite for riskier, or higher-yielding, assets.

The Egyptian pound weakened 0.4 per cent to 5.85 per US dollar after Moody's Investors Service cut its rating of the Middle Eastern nation's government bonds to Ba2 from Ba1 and put it on negative watch as protests calling for the dumping of President Hosni Mubarak continue.

Stronger than expected annual inflation in Europe kept investors pessimistic, though this eased with upbeat retail spending and manufacturing data in the US

That comes ahead of a busy day locally, with the Reserve Bank of Australia set to review its target cash rate, the ANZ Commodity Price Index likely to report new record highs, the first tranche of employment data, leading into Fonterra's online auction today in the US.

"Currencies traded in line with gyrations in risk appetite amid the ongoing concerns with the Egyptian situation," said Mike Jones, strategist at Bank of New Zealand.

"If the RBA provides a firm signal that it's on hold in the future, we'll probably see gains in the kiwi/Aussie cross," he said, referring to the trans-Tasman currencies colloquially.

The kiwi fell to 77.19 US cents from 77.49 cents yesterday, and declined to 77.37 Australian cents from 77.82 cents.

It slipped to 68.74 on the trade-weighted index of major trading partners' currencies from 69.06 yesterday, and dropped to 63.36 yen from 63.50 yen. It decreased to 56.43 euro cents from 56.84 cents yesterday, and was down to 48.18 pence from 48.74 pence.

Jones said the currency may trade between 76.80 US cents and 77.50 cents today with the slew of event risk, and Chinese performance of manufacturing indices also likely to weigh on the kiwi.

He expects the currency will continue to receive support from investors when the ANZ commodity price index shows locally-produced raw materials are going from strength to strength, and prices at tomorrow's dairy auction will probably extend their gains.

Analysts expect a 1.4 per cent increase in total filled jobs during the December quarter, according to a Reuters survey, with the labour cost index growing 0.5 per cent in the period.

That comes ahead of Thursday's household labour force survey, which will probably show the unemployment rate held at 6.4 per cent.