NZ dollar dips below US73c

The New Zealand dollar fell in afternoon trading after the National Bank of New Zealand Business Outlook (NBBO) survey showed confidence slid for a third consecutive month.

Earlier the Australian dollar fell on softer than expected consumer price index (CPI) data, dragging the NZ dollar with it but the NZ dollar rose against the Australian dollar.

The NZ dollar was US72.92c at 5pm from US73.27c at 8am and US73.41c at 5pm yesterday. It rose to A81.60c from A81.40c yesterday. The Australian dollar fell to US89.32c from US90.18c yesterday.

The Australian headline CPI rose 0.6 per cent in the June quarter, modestly lifting the annual inflation rate to 3.1 per cent. This outcome was well below consensus.

"Since the release of the business confidence survey kiwi fell about 40 points," said Murray Hindley, chief currency dealer at ANZ. He said earlier there was an unwinding of aussie-kiwi long positions, which kept the NZ dollar bid as people liquidated out of Australian dollars.

"The pace of economic recovery, but not the recovery itself, has shifted down a gear according to the latest NBBO," said Philip Borkin, economist at GoldmanSachsJBWere.

"Most worryingly, the sub-components of the survey around employment, investment and profits are softening again, although pricing intentions fell, which will be mildly welcomed by the Reserve Bank of New Zealand (RBNZ).

Attention is now turning to the RBNZ's official cash rate decision at 9am tomorrow. The central bank is expected to hike the official cash rate to 3 per cent from 2.75 per cent even though the economic recovery is fragile.

On Tuesday night the NZ dollar pushed up to a six-month high close to US74c but then fell away quickly.

BNZ markets strategist Mike Jones said that for the most part, the NZ dollar tracked gyrations in risk appetite and global equity markets.

Earlier in the night, upbeat European economic data and solid profit announcements from UBS and Deutsche Bank buoyed optimism about the global outlook, Mr Jones said.

But another disappointing read on US consumer confidence released later in the overnight session eroded investors' risk appetite and the safe haven currencies staged a comeback.

The NZ dollar was at 63.97 yen at 5pm, having risen to a five-week high 64.68 yen on Tuesday night from 63.84 yen at 5pm on Tuesday.

The NZ dollar slipped to 0.5611 euro at 5pm from 0.5648 yesterday.

The trade weighted index was 68.21 at 5pm from 68.39 yesterday.

- NZPA