By ELLEN READ
The New Zealand dollar has fallen over a cent against the United States dollar following upbeat remarks from US central bank chairman Alan Greenspan.
At 5pm yesterday the kiwi was at 63.90USc, down from 65.15USc at the same time a day earlier.
Greenspan gave the US economy a clean bill of health, reinforcing expectations that he will lift US interest rates from 1.25 per cent this year.
The market was picking 75 basis points of tightening but following Greenspan's talk, some are now picking 100 points.
His comments triggered heavy kiwi selling and while the currency was well supported under 65USc last week, over the last two days this had dried up sending the kiwi lower, Commonwealth Bank's manager of foreign exchange strategy Alex Schuman said.
"It's fairly disappointing and it's wrong-footed a lot of traders. There's been lot of hedge fund or hot money accounts trying to play the commodity currencies and it seems they've lost a bit of money.
"They haven't been doing that well out of these currencies recently."
Accounts which were buying last week have been selling at the same level this week, Schuman said.
"The big question in the market is, is this a trend turn in the US dollar?"
Evidence from the bond markets would suggests the US bounce is a temporary factor as US bond spreads have been narrowing relative to other bond spreads, making the greenback less desirable.
On the kiwi/aussie front, volumes have been heavy this week due mainly to events in the energy sector.
AGL bought back A$800 million of kiwi a few nights ago and that helped the Aussie over the kiwi. Since then Origin's news that it is taking over Edison's Contact Energy shareholding, had hit the aussie to the kiwi's benefit, Schuman said.
"There's been quite a lot of activity thanks to M&A flows between the two currencies, but overall the Australian dollar has been perking up a little bit relative to the kiwi." he said.
At 5pm yesterday the kiwi was at 89.51Ac from 89.68Ac on Wednesday.
Kiwi drops on positive US outlook
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