Strong US dollar drives kiwi lower

The New Zealand dollar was around its lowest level against the greenback in nearly two weeks when the local market opened, as the United States currency strengthened broadly amid growing risk aversion.

The US dollar rose against the euro for the third straight session after Fitch cut Greece's credit rating, stoking fear about government deficits and concern about the obstacles still facing global recovery.

Renewed concerns about Dubai's debt woes also discouraged risk appetite, lifting the greenback as investors unwound carry trades that involved borrowing the US currency at low rates to finance purchases of higher-yielding currencies and assets.

The yen also rose broadly as investors reduced yen-funded carry trades, and Moody's Investors Service further stoked unease when it said fiscal crises in a number of top-rated countries could last for "several years".

By 8am the New Zealand dollar was under US70.80c, having dropped from US71.47c at 5pm yesterday.

The kiwi was also down to 62.59 yen at the local open, from 63.62 yen at 5pm, and having been under 62.50 yen to its lowest level in more than a week.

The NZ dollar was little changed at 0.4817 euro at 8am, and edged up to A78.27c against the Australian dollar from A78.13c at yesterday's local close. The trade weighted index fell to 63.67 at 8am from 64.01 at 5pm.

BNZ Capital senior strategist Danica Hampton said lacklustre global economic news, combined with losses across global equities, had seen investors shun growth-sensitive currencies such as the NZ dollar in favour of the relative safety of the greenback and yen.

For today, the deteriorating global backdrop should ensure bounces in the kiwi against the US dollar were limited to the US71.40c to US71.50c region, she said.

She was looking for a small gain in November electronic card transaction data due out today, but the main focus remained on the Reserve Bank's interest rate decision tomorrow.

- NZPA