The New Zealand dollar rose against the greenback after a bounce in global commodity and equity markets, and further US dollar weakness following comments from a Chinese official on the risks of excessive US dollar holdings.
A lack of headline news in the offshore session saw risk assets recover some
of the ground lost yesterday amid fears around the global economic recovery. On Wall Street, the Standard & Poor's 500 Index rose 0.4 per cent to 1,291.41 in afternoon trade, a day after the index hit its lowest level in more than two months.
Commodity prices also pared some of yesterday's losses, with the Thompson Reuters Jefferies CRB Index, a measure of 19 soft and hard commodities, gaining 0.3 per cent to 346.34. The bump in risk appetites saw increased demand for growth-linked currencies such at the New Zealand and the Australian dollar.
The kiwi's gain versus the greenback was also helped by the ongoing weakness in the US dollar, which fell after Guan Tao of the State Administration of Foreign Exchange warned against risks of excessive holdings US holdings, saying Washington may find it hard to resist the temptation of devalue its currency in a bid boosts its ailing economy.+
The Dollar Index, a measure of the greenback against six major currencies fell to 73.53 from 73.64 yesterday.
"We know that China is nervous about its US dollar holdings and has been fairly critical of US monetary policy, and the comments were just a red rag to a bull looking to sell the US dollar," said Mike Jones, a market strategist at Bank of New Zealand.
The kiwi dollar recently traded at 82.16 US cents, up from 82 cents yesterday, and rose to 70.23 on the trade-weighted index of major trading partners' currencies from 70.19. It was little changed at 76.55 Australian cents from 76.56 cents previously, and edged down to 65.76 yen from 65.79 yen.
It was little changed at 55.92 euro cents from 55.93 cents yesterday, and was unchanged at 49.93 pence.
The kiwi dollar may trade in a range of between 81.40 US cents and 82.60 cents, Jones said, with the strong buying on any dips.
