Dollar gains from three week low as US data awaited

By Paul McBeth

Monday 23rd February 2009

The New Zealand dollar rose from a three-week low before US economic data that's expected to show a deteriorating climate.

Federal Reserve Chairman Ben Bernanke's semi-annual report to Congress on monetary policy will be watched closely by currency traders, while new and existing home sales and the house prices in the US are likely to show continuing weakness in the US economy.

The Dow Jones Industrial Average fell to a six-year low last week amid fears the Obama Administration would nationalise banks. The White House moved to hose down the speculation. The kiwi followed equity markets down to a three-week low before gaining on weakness in the US dollar.

"Fears about the global recession are the driver" of the New Zealand dollar, said Danica Hampton, currency strategist at Bank of New Zealand. "People are uncertain" though it will take a strong catalyst to "push it below that 50 US cent level."

The kiwi rose 50.89 US cents from 51.14 cents last week and increased to 47.52 yen from 47.04 yen. It gained to 79 Australian cents from 78.78 cents last week, and fell to 39.75 euro cents from 39.88 cents.

Hampton said the kiwi may trade between 50 US cents and 51.80 cents today and take its cues from the release of offshore data releases this week. "The kiwi is still, on balance, lower," she said.

Domestic inflation concerns are expected to ease, said the ANZ National Bank in a report. This will give Reserve Bank Governor Alan Bollard room to continue cutting interest rates if he deems it necessary. The central bank said any future cuts will probably be smaller than those in the last six months. Bollard embarked on the steepest series of cuts to the official cash rate last July, and has slashed the rate to 3.5% from 8.25%.

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