NZ dollar slips, but holds onto gains as equities rally

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The New Zealand dollar slipped from its recent highs against the greenback, but held onto most of yesterday's gains as global equities continued to recover from their August losses.

The New Zealand dollar recently traded at 85.16 US cents, down from 85.47 cents yesterday, and fell to 72.86 on the trade-weighted index of major trading partners' currencies from 72.95 previously.

Global equities rose for a fourth day as investors appeared to be putting the volatility of August behind them, with increased demand for risk assets such as stocks and commodities.

The primary driver of risk was the release of the minutes from the US Federal Reserve's latest policy session, which fuelled speculation the central bank was preparing to launch a new round of monetary expansion. Data for factory activity in the Chicago region also came in stronger-than-expected.

Europe's Stoxx 600 Index closed 2.9 per cent higher at 237.43, and the Standard & Poor's 500 Index rose 0.5 per cent to 1,218.63 although gains were capped by the US government's bid to block AT&T's $39 billion takeover of T-Mobile USA. Commodities rose 0.5 per cent to 342.57, as measured by the 19-commodity Thompson Reuters Jefferies CRB Index.

"Improving risk appetite, helped by less bad data and hopes of new policy measures by policymakers, provided a better tone to markets overnight," said Alex Sinton, a senior dealer at ANZ New Zealand. "Despite some foul play yesterday and overnight the New Zealand dollar was well supported across the board and moved past the advantage line easily."

So-called safe haven slipped in the risk-off environment, with gold easing to US$1,823.79 an ounce from US$1,826.20 previously, and yields on US 10-year Treasury bills rose to 2.234 per cent from 2.1864 per cent previously.

On the crosses, the kiwi recently traded at 79.73 Australian cents, down from 80 cents yesterday, and fell to 65.20 Japanese yen from 65.41 yen previously. It rose to 59.27 euro cents from 59.08 cents yesterday, and gained to 52.41 pence from 51.36 pence previously.

The kiwi may trade between a range of 85.15 US cents and 85.85 cents today, Sinton said, with strong buying the dips likely to see the currency well supported although sustained moves beyond 85.50 cents look unlikely on the day.