By JIM EAGLES and AGENCIES
The New Zealand dollar surprised yesterday by strengthening - rather than plummeting - after the United States and British strike against Afghanistan.
Markets around the world reacted cautiously to news of the attack.
Share prices generally dropped slightly on light trading - typically, the NZSE 40 ended down just 0.5 per cent - as the world waited to see the effect on the all-important US sharemarket.
But the kiwi bucked the downward trend and strengthened slightly.
On Friday it closed at 41.14USc but it rose in early trading yesterday and hung on to close at 5 pm on 41.55.
Dealers indicated it was mainly a matter of New Zealand being ignored as money flowed from the US dollar to the safety of the Swiss franc or the Japanese currency.
But it was still a contrast to the sharp downward movement which might have been expected.
The Australia dollar also continued its recent rise - up from 50.12USc on Friday to 50.66 at 5 pm yesterday - with dealers speculating it was being seen as a haven in uncertain times.
But overseas opinion is that any Australasian currency lift may be shortlived.
Mike Moran, an economist at Standard Chartered in Hong Kong, said the Swiss franc and the yen were likely to benefit "while the dollar softens a little bit. And as uncertainty creeps in again, a lot of emerging market-related currencies will likely feel the heat".
Mr Moran singled out the likely victims as Australia, New Zealand, South Africa and some Asian currencies, particularly the Indonesian rupiah, which tumbled more than 1000 rupiah to 10-week lows yesterday.
The rupiah's fall was one of the few sharp movements in response to the strikes, and may have been more due to fears about Indonesia's political stability.
Commentators are predicting the attack's modest impact on New Zealand markets points to the likely response globally.
Some analysts see scope for a relief rally, with the end to uncertainty over what might happen and the limited nature of the attacks allaying some of the anxiety that has upset global markets.
"It tends to remove a little bit of uncertainty," said Alan Ruskin, research director at 4Cast in New York. "We could get a 100 point [rise] in the Dow because it removes uncertainty, assuming nothing has gone wrong with the strategy."
The strike on Afghanistan also had little impact on oil prices.
After the September 11 attacks, world oil prices rose to more than $US31 a barrel on fears of war, before dropping when it became apparent that the more likely outcome was global recession.
This time the only effect of the hostilities was to halt the price fall.
Soon after news of the strikes broke, US November light crude climbed to a peak of $US22.85 a barrel before retreating to $US22.52 - a rise of 13c, but still 11c lower than before the weekend.
Oil prices are expected to rise further within days, but only modestly.
"It's pretty much impossible to have a war without some premium on the price of oil," said Sarah Emerson, strategist at Energy Security Analysis, Boston.
"My guess is we will gain one or two dollars over the week, even though there is no immediate threat to oil supply."
In all the markets, the sentiment yesterday was one of wait and see.
"We're all just guessing about the scope and direction of [the armed strikes]," said Carl Weinberg, chief economist at High Frequency Economics in New York.
New Zealand dollar rises over the fray
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