Currency: Kiwi returns from sub-US49c level

The New Zealand dollar regained the half cent lost overnight On Thursday, buoyed by glowing current account data and a rebound in US stocks.

In a scandal that rivals last year's collapse of energy trader Enron, long-distance carrier WorldCom Inc revealed it had inflated financial results by $US3.8 billion ($NZ7.8 billion).

At 5pm the kiwi traded at US49.05c, up from US48.63c at the open but down from Wednesday night's US49.79c close. The kiwi traded between a wide 160-point range overnight.

The aussie was at US56.66c, also after a 160-point sell-off overnight.

Basil Payn, chief currency dealer at Westpac Bank, said the kiwi and aussie fell victim to a serious bout of profit-taking as investors pared back their positions in light of the US telecoms scandal.

"The markets are a little bit unnerved in the States over the WorldCom thing," Mr Payn said.

"There are a lot of positions being pared back... there's been a few longs trying to get out of their positions in the kiwi and people that would normally have bought on that dip are sitting on their hands - the buyers have dried up."

Sean Brown, head of global markets at Deutsche Bank New Zealand, said the New Zealand currency had held up very well after its sell-off overnight.

Offshore, US stock markets rebounded at the close but in London the FTSE was off more than 2 per cent.

"(The kiwi's) recovered well after taking a bit of a hiding overnight," Mr Brown said.

"We saw local demand, we've seen exporter and investor demand on dips. This is the second dip we had to the US48.50c level (in a week), after twice seeing levels up around the US50c area.

"Although volatility's picked up, we are seeing people with interest to buy in that US48.50c area when we get down there.

"I think people perceive that over a period of time it's going up."

Surprisingly positive current account data helped boost sentiment towards the kiwi. A March quarter current account surplus of $732 million, compared with a December deficit of $1.69 billion, caught everyone by surprise.

Market expectations were for a median deficit between $140 million and $200 million.

"It was a much better number than the market was predicting. I think the market thinks it's the low point (at 2.2 per cent of gross domestic product), but certainly if it does get worse from here, it will be getting worse from a much better base than what we thought," Mr Brown said.

He thought the kiwi would continue rising overnight, to about US49.50c, depending on the direction of the US markets.

On the crosses by 5pm the kiwi traded at A86.58c (A86.51c at Wednesday's close), 58.83 yen (60.17), 32.13 pence (32.88), 0.7306 Swiss francs (0.7410) and 0.4971 euro (0.5050).

Against the kiwi, the aussie was buying $NZ1.1551 ($NZ1.1560).

On the money market 90-day bills were at 5.99 per cent (5.95), the trade-weighted index was at 55.81 (56.60) and the monetary conditions index had eased to minus 215 (minus 150).

On the debt market the April 2004 bonds were at 5.98 per cent (5.90), the November 2006 bonds were at 6.38 per cent (6.28), and the November 2011 bonds were at 6.57 per cent (6.44).

- NZPA