Dollar slides against surging greenback

The New Zealand dollar dipped below US71c early today for the first time in a week as the greenback soared against a backdrop of improving United States economic data.

Around 8am the kiwi was buying US70.98c, from US71.51c at 5pm, and after having topped US73c a week ago.

The NZ dollar also fell to 63.84 yen by 8am from 64.33 at the local close, but was little changed at 0.4949 euro and at A80.07c against the Australian dollar, although it did get to a month-high A80.35c earlier in the day. The trade weighted index fell to 64.72 at 8am from 65.00 at 5pm.

The US dollar hit a 3-1/2-month high against the euro, a day after the Federal Reserve highlighted improvement in the US economy and stood by plans to stop most emergency lending by February.

Data showing US jobless claims unexpectedly rose last week tempered US dollar gains, but a regional US factory index improved, leaving the greenback near a two-month high against sterling and up more than 1 per cent on the Australian dollar.

"The US economy is picking up, and the Fed acknowledged this by saying it will stop most of its quantitative easing by February 1," said Hidetoshi Yanagihara, senior currency trader at Mizuho Corporate Bank in New York.

ANZ bank said end of year position squaring looked to be gaining a head of steam, judging from the overnight price action, as risk was taken off the table across markets.

The clear beneficiary had been the US dollar and US bonds, while the clear losers were risky assets and high yielding currencies such as the NZ and Australian dollars, ANZ said.

It may not be long before the US70c level came under a real test for the NZ dollar, and in the liquidity starved mid-December to mid-January period, big moves could be made on small volumes.

- NZPA