NZ Dollar: Kiwi bounces along near six-year low

The New Zealand dollar bounced along near six-year lows against the greenback overnight as the United States currency soared to a three-year high against a basket of major currencies.

The rise for the US dollar came as insurer AIG reported a record loss, adding to worries that the financial crisis is growing more severe and enhancing the US currency's safe-haven appeal.

Wall Street sustained heavy losses, extending a global stock market rout as the Dow opened below 7000 for the first time since 1997.

By 8am the NZ dollar was buying US49.52c, having dipped below US49.20c several times overnight after dropped as low as US49.12c - its lowest level since November 2002 - early yesterday afternoon.

BNZ Capital currency strategist Danica Hampton said the NZ dollar had been swept up in a "global melee".

Heavy losses in global equities and risk aversion had seen investors ditch growth sensitive currencies such as the NZ dollar in favour of the relative safety of the greenback.

But it had not all been one-way traffic in the NZ dollar, said Hampton.

A variety of local accounts had used the fresh six-year lows as an opportunity to top-up export cover, while profit-taking on short NZ dollar positions against the Australian dollar had lent some support to the kiwi against the greenback.

ANZ bank said the NZ dollar was surprisingly resilient in overnight trading, given the circumstances.

The key event in the Australasian trading session today would be a decision on Australian interest rates by the Reserve Bank of Australia at 4.30pm (NZT).

The kiwi dipped to a seven-month low against the aussie around A77.60c about 9pm then edged up to be at A78.24c by today's local open.

Against the euro, the NZ dollar was buying 0.3934 at 8am from 0.3922 at 5pm yesterday, while against the yen the kiwi was up to 48.26 from 48.10 at yesterday's local close. The trade weighted index was 51.28 around 8am from 51.04 at 5pm yesterday.

- NZPA