Strong night for NZ dollar

The New Zealand dollar had a strong night, reaching a two-year high against the euro and a two-month high against the yen.

The kiwi also managed early today to momentarily reach US71c against the greenback for the first time in nearly a week, but by 8am had retreated to US70.48c, only a small gain on the US70.30c at 5pm yesterday.

The fall of the euro came ahead of a European Union summit where EU leaders were hoping to reach an agreement on helping debt-stricken Greece.

A high level of volatility was expected during the meeting, with one bout of weakness following a comment from European Central Bank President Jean-Claude Trichet that if the International Monetary Fund took the lead in aiding Greece it would reflect negatively on Europe's ability to handle its own problems.

The NZ dollar peaked early today at 0.5318 euro, according to Reuters data, before easing to 0.5302 by the local open, up from 0.5273 at 5pm. The kiwi also climbed to 65.70 yen from 64.54 at the local close, and by 8am was at 65.37 yen.

ANZ bank said yesterday's solid gross domestic product report, putting New Zealand December quarter growth at 0.8 per cent, was just enough for markets to focus elsewhere. Overnight specific demand for the NZ dollar ensured it again climbed against all currencies.

While the EU summit may deliver some euro strength, underlying weakness in the European currency would not disappear given the line up of countries with underlying fiscal issues, ANZ said.

The yen's weakness was economically justified, and the kiwi's cross against the Japanese currency had the potential to spike higher as yield demand rose.

The NZ dollar was also up to A77.56c at 8am from A77.16c at 5pm, while the trade weighted index lifted to 65.99 at the local open from 65.63 at 5pm.

A surge against the British pound took the NZ dollar to a peak around 47.60p - the kiwi's highest level since June 1979.

- NZPA