Currency: Dollar opens higher on ongoing demand

The New Zealand dollar today closed on seven month highs against both the US and Australian dollars and on its trade weighted index.

Ongoing demand from Japanese buyers was behind much of the rise as well as switching out of the Australian dollar, which has been hit by falling commodity prices.

Against the greenback, the kiwi dollar rose to US66.35c from US65.85c yesterday, and the trade weighted index was stronger at 66.82 (66.37), its highest level since early March.

New Zealand interest rates remain attractive to foreign investors with interest rates in both the US and Australia thought to be peaking.

"No change (in interest rates) by the RBA (Reserve Bank of Australia) and emerging thoughts that they may be able to hold off in this cycle is creating a groundswell of support for the New Zealand dollar on its cross," ANZ said.

The kiwi continues to be well supported by yield-seeking investors, BNZ said.

The NZ-US 2-year bond spread widened to around 206bps, its highest level since September 2005.

There has been a pick-up in NZ dollar uridashi issuance over the past couple of months. Overnight the World Bank announced a new 2-year uridashi issue worth $282m, suggesting that issuance is well on the way to offsetting the $962m worth of maturities in October, BNZ said.

Against the aussie, the kiwi broke above A89c for the first time since early March, sure to cause new headaches for exporters. It closed yesterday at A88.50c.

The US dollar was mixed against other currencies, brushing off weak surveys on the US jobs market and services sector, as weak oil prices reassured investors the US economy may not slow as much as thought.

The US dollar was knocked back slightly though after Fed chairman Ben Bernanke said the US housing market was in a substantial correction.

Rates:

5pm today 5pm Wednesday
NZ dlr/US dlr US66.35c US65.85c
NZ dlr/Aust dlr A89.04c A88.50c
NZ dlr/euro 0.5225 0.5174
NZ dlr/yen 78.10 77.74
NZ dlr/stg 35.17p 34.93p
NZ TWI 66.82 66.37
Australian dollar US74.53c US74.34c
Euro/US dollar 1.2698 1.2723
US dollar/yen 117.73 118.06

- NZPA