Dollar falls from post-float high

The New Zealand dollar has hit its highest level against the US dollar since it was floated in 1985. Curreny analysts say it has gained its own momentum and could go higher. Graphic / Bloomberg, NZ Herald

The New Zealand dollar fell from a post-float high against the greenback, with overseas flows subdued because of UK and US public holidays, before the release of a survey on business confidence.

The National Bank Business Confidence survey for May will be scrutinised for signs of further improvement in the local economy.

Last month's data showed confidence levels among local businesses rebounded sharply in the wake of the Christchurch earthquake in February and the Japanese tsunami in March, and the market is expecting today's figures to show further gains.

The data follows on from yesterday's trade figures, which showed New Zealand recorded a record monthly trade surplus of $1.1 billion in April.

"The market will react to any strong data just because the market isn't expecting the New Zealand economy to be in such a good state," said Khoon Goh, head of market economics and strategy at ANZ New Zealand.

Prime Minster John Key, speaking at post-Cabinet press conference yesterday, laid some of the strength of the kiwi at the feet of the weaker US currency, suggesting that there wasn't much the government could do short of intervention to pull the currency back from elevated levels, a move that was not being considering at this time.

"There is no doubt that there is still underlying US weakness theme, but what we saw last week and this week was outright New Zealand dollar strength," Goh said.

The kiwi dollar recently traded at 81.59 US cents, down from 81.75 cents yesterday, and slipped to 70.48 on the trade-weighted index of major trading partners' currencies from 70.57 yesterday.

It fell to 76.35 Australian cents from 76.40 cents previously, and was little changed at 66.04 yen from 66.05 yen. It fell to 57.13 euro cents from 57.26 cents yesterday, declined to 49.52 pence from 49.66 pence previously.

Europe's sovereign debt woes were again in the headlines amid reports that European Union and International Monetary Fund officials were likely to deliver their verdict on Greece's inability to reign in government spending and bring its deficit under control.

That comes after a German newspaper article over the weekend claimed the indebted country had not met a single reform condition placed on it as part of the bailout package.

The kiwi dollar mat trade between 81.40 US cents and 82 cents, Goh said, with any moves towards a fresh post-float high likely to be capped by profit taking.