The New Zealand dollar today held on to overnight gains against the Australian and United States currencies.
Around 5pm the kiwi was buying US62.22c, little changed on this morning's open and up on yesterday evening's close at US61.87c. The story was similar against the Australian dollar which was at A82.63c at 5pm this evening from A82.20c 24 hours earlier.
Commonwealth Bank of Australia NZ economist Chris Tennent-Brown said the global metal and oil price decline had dragged the Australian dollar lower and along with it the NZ currency.
The metal price decline was expected to continue in the next few weeks, with the Australian dollar likely to stay soft. That suggested the kiwi would firm against the Australian dollar but be weak against other currencies.
ABN AMRO Sydney-based director of FX Strategy Greg Gibbs warned today that currencies such as the kiwi, with large current account deficits funded primarily by debt capital inflows would struggle in the coming year.
Visiting this country to speak with ABN AMRO clients, Mr Gibbs said the United States dollar was in the same basket.
But with a current account deficit around 9 per cent of GDP in this country, above the 7 per cent of GDP in the US, and coming off record levels last year the kiwi was more vulnerable than most, he said.
The reason for his concern was rising yields across the G7 major economies as central banks paid more attention to inflation risks and were prepared to see more moderate economic growth.
Of particular concern was the rise in Japanese yields this year, threatening the so-called "carry trade" where investors borrowed in yen to fund investments in a wide range of global assets, Mr Gibbs said.
While much of the NZ dollar's adjustment had already happened this year the kiwi was still somewhat above its long run average and the global environment this year would continue to work against it.
The following are Reuters currency rates:
5pm today 5pm Monday
NZ dlr US62.22c US61.87c
NZ dlr/Aust dlr A82.63c A82.20c
NZ dlr/euro 0.4832 0.4853
NZ dlr/yen 69.11 69.32
NZ dlr/stg 32.97 33.04
NZ TWI 61.69 61.65
Australian dollar US75.36c US75.23c
Euro/US dollar US1.2876 US1.2750
US dollar/yen 111.03 112.04
- NZPA
<i>Currency:</i> NZ dollar holds overnight gains
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