NZ dollar climbs back over 70 cents as American housing data weighs on greenback

Thursday 24th December 2009

The New Zealand dollar climbed back over 70 U.S. cents as the greenback ran out of puff before Christmas amid weaker-than-expected U.S. housing data.

New home sales in the U.S. shrank 11% last month to a seven-month low of 355,000, while the University of Michigan consumer confidence survey came in just below forecast at 72.5. The Dollar Index, a measure of the greenback against five major currencies, dropped 0.6% to 77.83 in its first daily decline this week. Investors have pared back their short positions in the U.S. dollar as the prospect of an earlier than expected interest rate hike by the Federal Reserve grows for next year.

“There’s been a bit of profit-taking on the U.S. dollar, which has been sold and all of the currencies have rallied, with the exception of maybe the pound,” said Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia. The kiwi “looked a bit over-sold and we’ll probably see a continuation of a bit of kiwi strength going into the New Year” as equities usually close the year strongly, he said.

The kiwi climbed to 70.47 U.S. cents from 69.93 cents yesterday, and pushed up to 64.59 on the trade-weighted index, or TWI, from 64.32. It jumped to 64.54 yen from 64.18 yen yesterday and increased to 80.08 Australian cents from 79.87 cents. It was little changed at 49.09 euro cents from 49.05 cents yesterday and rose to 44.13 pence from 43.84 pence.

Kelleher said the currency may trade between 70.25 U.S. cents and 70.60 cents today as the “markets seem pretty happy to let it drift back up,” though he would look to sell at around the 72/73 cents mark.

“The risk is that the Dollar Index will keep rallying – that’s the trend and the kiwi should be lower in the medium-term,” he said.

The Canadian dollar outperformed in the New York session after Finance Minister Jim Flaherty said Russia and China may diversify their holdings in the North American country’s currency. The kiwi was little changed at 73.78 Canadian cents from 73.81 cents yesterday.

Businesswire.co.nz

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