NZ dollar pushes back toward US81c

File photo / Dean Purcell

The New Zealand dollar dipped sharply today but was back near recent highs as the session ended while the United States currency slipped to a fresh three-year low.

The NZ dollar was at US80.76c at 5pm from US80.84c at 8am and US80.69c at 5pm yesterday.

It fell on pronouncements by the US Federal Reserve in the early hours of the morning and again when the Reserve Bank of New Zealand (RBNZ) held the official cash rate at 2.5 per cent at 9am. The RBNZ indicated the level was appropriate for some time, given the economic disruption of the earthquakes in Christchurch.

But the NZ dollar recovered as the Australian dollar rose to a fresh 29 year high.

ASB said the brief statement by the RBNZ did suggest that it was more comfortable the wider economy would hold up despite the earthquake. In particular, the RBNZ noted the pick up in housing market turnover and business investment outside of Christchurch. It was upbeat on the agricultural outlook but the high NZ dollar and oil prices were seen as unwelcome.

ASB said the US0.7c drop in the currency immediately after the statement was a bit of an overreaction, given the decision to hold was unanimously expected.

"The RBNZ language surrounding the level of the NZ dollar does not suggest to us that intervention is on the cards," ASB said.

The NZ dollar briefly topped US81c for the first time in more than three years yesterday afternoon, then fell away overnight as Federal Reserve chairman Ben Bernanke gave little indication that the central bank was close to tightening monetary policy.

Investors have pointed to loose Fed policy as a source of US dollar weakness. Mr Bernanke told reporters at a briefing that a strong US dollar was in the US interest but said the central bank could best ensure a strong currency by creating the conditions for solid growth.

"In our view, if we do what's needed to pursue our dual mandate for price stability, maximum employment, that will also generate fundamentals that will help the (US) dollar in the medium term," he said.

The NZ dollar slipped to 0.5434 euro at 5pm from 0.5494 at the same time yesterday, but rose to 66.00 yen from 65.81, while easing to A73.85c from A74.44c yesterday. The trade weighted index slipped to 68.66 from 69.

- NZPA