Modest overnight gains for dollar

The New Zealand dollar strengthened modestly overnight, topping A80c against the Australian dollar for the first time in a month.

The NZ currency has been gaining on its trans-Tasman counterpart since the Reserve Bank of New Zealand's monetary policy statement last Thursday surprised the market with its hawkishness.

Yesterday data showed Australia's gross domestic product grew by a smaller than forecast 0.2 per cent in the third quarter, while dovish central bank remarks prompted investors to trim expectations for tightening next year.

Australia lifted its cash rate 75 basis points in just three months but investors are now anticipating a pause at the next rates decision in February.

By 8am today the kiwi was buying A80.07c, having peaked around A80.20c earlier today after lifting from A79.82c at 5pm yesterday.

The NZ dollar was also up to US72.01c by the local open from US71.76c at 5pm, as the greenback slipped ahead of a Federal Reserve meeting and after data showing tame inflation last month suggested the US central bank need not rush to lift interest rates from record lows.

The kiwi was up to 0.4953 euro at 8am from 0.4938 at the local close, and lifted to 64.63 yen from 64.27. The trade weighted index was 65.18 at 8am from 64.99 at 5pm.

BNZ Capital strategist Mike Jones said the sharply weaker Australian dollar had dragged the kiwi lower through the early part of the night, but later in the night solid gains across equity and commodity markets saw the NZ dollar rebound against the greenback.

- NZPA