The New Zealand dollar closed easier today after growing tensions with Iran saw investors look for safer bets than the kiwi.
Local dealers said there was no indication selling of kiwi dollars was related to cartoons published in New Zealand over the weekend depicting the Islamic prophet, Mohammad. Violent protests have erupted in a number of Muslim countries against countries where the cartoons have been published.
The kiwi closed slightly stronger than its opening at US68.28c but well down on its US68.92c on Friday before the long weekend.
The kiwi was well supported on its crosses, closing on A92.00c compared with A91.60c on Friday evening.
Against the US dollar, the Australian dollar fell to US74.22c from US75.28c here on Friday.
ANZ Investment Bank chief dealer Murray Hindley said there had been switching back into kiwi dollars from the aussie in expectation of new kiwi dollar uridashi bond issues later this month.
However, ANZ strategists said investors, previously attracted by New Zealand's high interest rates, appeared to be finally considering the risks of investing in a slowing economy with high levels of current account debt.
"The recent increase in risk aversion raises questions about the ongoing appetite for the New Zealand dollar," ANZ said.
"It is the long-awaited re-pricing of global risk that we suspect ultimately holds the key for the New Zealand dollar's demise."
The focus this week is tomorrow's employment data, including the December quarter Labour Cost Index and Quarterly Employment Survey. The data is expected to show the local economy is continuing to slow.
In the currency majors, the market was focused on interest rate differentials and that was making the dollar firm, Takehiko Jimbo, a trader at Mitsubishi UFJ Trust and Banking, said.
The dollar hovered near a seven-week high against the yen and a one-month peak versus the euro on Tuesday, with comments by a Federal Reserve official reinforcing expectations for further rises in interest rates.
Dallas Fed President Richard Fisher said on Monday he fully expected the Fed to keep control of inflation, encouraging market views that there is more monetary tightening to come.
His comments follow data last week showing upward revisions to job growth and a fall in the unemployment rate to a 4-1/2-year low, reinforcing the outlook for the Fed to keep lifting overnight rates after 14 straight rises to 4.5 per cent.
Rates:
5pm today 5pm Friday
NZ dlr US68.28c US68.92c
NZ dlr/Aust dlr A92.00c A91.60c
NZ dlr/euro 0.5702 0.5771
NZ dlr/yen 81.16 81.79
NZ dlr/stg 39.05p 39.14p
NZ TWI 70.39 70.53
Australian dollar US74.22c US75.28c
Euro/US dollar US1.1965 US1.2020
US dollar/yen 118.97 118.83
<EM>Currency:</EM> Dollar softens versus Greenback
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