NZ dollar recovers after hitting three-week low

The New Zealand dollar recovered half a US cent today after falling overnight to three-week lows on renewed concern the worst of the global credit crisis may be yet to come.

The kiwi fell to an overnight low of US75.10c from US75.60c at yesterday's close but lifted to US75.73c by today's close as equity markets in Asia firmed.

Bank of New Zealand currency strategist Danica Hampton said the renewed credit crisis concerns had seen US equity markets plunge this week and carry trade currencies such as the NZ dollar slide.

Ms Hampton said selling was related to position squaring ahead of the Christmas holiday period. Others were quitting on the view that there were questions about the robustness of the New Zealand economy.

Lingering concerns about the credit crisis should keep downward pressure on the NZ dollar against the greenback, she said.

But several launches of investment trusts targeting Japanese investors this week have weighed on the yen and helped to limit the downside for high-yielding currencies like the kiwi when their stock markets were falling, the European bank dealer said.

"There is a yen selling factor that should keep the dollar and high-yielding currencies supported," he said.

Investors have been borrowing yen at low Japanese rates to fund purchases of higher-yielding currencies and assets.

Currency rates at 5pm:

NZ dlr/US dlr US75.73c US75.60c

NZ dlr/Aust dlr A87.77c A87.86c

NZ dlr/euro 0.5253 0.5247

NZ dlr/yen 85.77 85.65

NZ dlr/stg 37.57 37.39p

NZ TWI 70.97 70.90

Australian dollar US86.28c US85.77c

Euro/US dollar 1.4418 1.4404

US dollar/yen 113.26 113.26

- NZPA