The New Zealand dollar was not swept off its feet yesterday despite the appearance of a white knight, in the form of a better than expected current account deficit.
Current account deficits of more than 6 per cent of gross domestic product have long been a blot on New Zealand's copybook, but today the deficit for the June quarter shrank to $297 million - 4.0 percent of GDP.
Under normal circumstances that should have been enough to boost the kiwi, but after a brief rally the currency shed value on the back of a declining aussie.
At 5pm the kiwi traded at US40.27c from US40.58c last night, while the aussie sank to US48.83c from last night's US49.32c.
One local dealer said the kiwi had a "dead cat bounce", unable to hold its ground against the aussie which has been sold off mercilessly.
The kiwi's range was US40.17/48c.
"I'd expect a test of the lows overnight," the dealer said.
"It was a pretty quiet day, we've drifted off lower on the back of the weaker aussie, which has basically been the focus of the market here today. It's looking like it's going to drift lower.
"We had some good data where the kiwi did rally, but [there was] a dead cat bounce given the weight of the aussie selling, which has seen us come off again.
"[Aussie weakness] seems to be ongoing - they've got flows going through that are coming from the other side, but stocks and the market still appear to be a little bit long," he said.
Adding to the negative view on the aussie was a report overnight that focused on mining company Pasminco, whose debt is greater than people had originally forecast.
Australian job data out today was also weak, with the latest job vacancies figures showing the labour market was weaker than expected, economists said.
In the three months to August, job vacancies were down 3.5 per cent, seasonally adjusted, according to the Australian Bureau of Statistics.
On the crosses at 5pm the kiwi traded at A82.45c (A82.54c), while the aussie was buying $NZ1.2129 ($NZ1.2139).
On the other crosses the local unit was trading at 47.65 yen (47.60), 27.31 pence (27.59), 0.8551 marks (0.8599), 0.6461 Swiss francs (0.6446) and 0.4382 euros (0.4395).
The trade-weighted index was at 47.82 (47.89), 90-day bill yields were at 5.27 per cent (5.31) and the monetary conditions index was at minus 1062 (minus 1047).
Among the bonds, the March 2002s were at 5.10 per cent (5.13), the April 2004s were at 5.45 per cent (5.52), the November 2006s were at 6.04 per cent (6.12), and the November 2011s were at 6.50 per cent (6.60).
- NZPA
<i>Currency:</i> Kiwi not boosted by current account data
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