NZ dollar tops US71.50c for first time in five weeks

Photo / Dean Purcell

The New Zealand dollar topped US71.50c against the greenback for the first time in more than five weeks after China's vow to allow a flexible yuan rekindled optimism about global recovery.

But the kiwi was unable to hold onto the gains and by 8am today was down to US70.85c, below its level of US71.06c at 5pm yesterday.

In its morning briefing notes, ANZ bank said the weight of a falling euro had been too much for the NZ dollar early today.

The NZ dollar reached its highest level in nearly three years against the European currency overnight around 0.5770 euro, slipping back to 0.5752 euro at 8am, up from 0.5717 at 5pm.

ANZ said it expected the NZ dollar to oscillate either side of US71c for much of today and garner any strength from stronger equity markets as it waited the challenge of key first quarter data releases in the next few days.

Balance of payments figures are out tomorrow, with gross domestic product on Thursday.

Commodity-tied currencies such as the NZ and Australian dollars are expected to be underpinned by Beijing's currency move, which should boost purchasing power and demand in the world's third largest economy.

"China's move has unleashed improved confidence and higher risk appetite," said Richard Franulovich, senior currency strategist at Westpac in New York.

"Commodity currencies such as the aussie and kiwi will always be the biggest beneficiaries on the ground that yuan strength raises China's purchasing power."

The NZ dollar also reached a five-week high around 65.30 yen but by 8am was down to 64.51, similar to its level at the local close.

The kiwi moved in a narrow band against its Australian counterpart overnight and by the local open was buying A80.76c. The trade weighted index was up to 68.14 at 8am from 68.04 at 5pm.

- NZPA