The New Zealand dollar consolidated at lower levels today as worries about Ireland's ability to repay its debts took centre stage, driving the euro lower against the United States and Japanese currencies.
Europe's woes diverted attention from a G20 summit in South Korea, where discussion was expected to include exchange
rate policies and global economic imbalances, though few investors expect a sweeping agreement.
By 5pm the NZ dollar was buying US77.52c, which is down from US77.98c at 8am and well below the US78.64c level at 5pm yesterday. Against the European currency the NZ dollar traded as high as 0.5721 euro, its highest since early September. It was at 0.5692 at 5pm from 0.5698 at the same time yesterday.
The euro sank to a six-week low against the US dollar. Dealers said positions in the market were generally being adjusted, including traders buying back dollars they had previously sold to reduce so-called short positions.
The NZ dollar mostly traded sideways today, while reflecting the realignments in the major currencies. The resignation of Pansy Wong from cabinet today after questions of the use of government funded trips for private business was eclipsed by the major currency moves.
Irish borrowing costs hit record highs as investors fretted over Ireland's ability to impose crippling fiscal austerity measures.
An associated souring in global growth sentiment saw modest declines in global equity markets, commodity prices fell and risk appetite dried up, BNZ markets strategist Mike Jones said.
Rising risk aversion bolstered demand for the "safe haven" of the US dollar at the expense of the euro, and NZ and Australian dollars.
ANZ said the NZ dollar was back within a more realistic range, having reversed an overextension on the topside. It did not expect much from the G20 meeting, ending later today, that would add positive support for the NZ dollar.
The NZ dollar was down to 63.81 yen at 5pm from 64.60 yesterday, and was little changed at A78.04c from A78.16c yesterday. The trade weighted index fell to 69.17 from 69.69 yesterday.
- NZPA
