NZ dollar falls from post-float high

The New Zealand dollar fell against the greenback, with the currency paring back gains following a rebound business confidence that suggested the economy is picking up pace.

The kiwi recently traded at 82.44 US cents, having reached 82.60 US cents yesterday, the highest since being allowed to trade freely in March 1985.

The National Bank Business Outlook survey for May showed business confidence jumped to 38.3 in the month, up from 14.2 in April. Gains in the past two months have now more than reversed the drop seen in the wake of the February 22 earthquake.

The elevated level of the dollar is likely to help ease inflation pressures in the New Zealand and take pressure off the Reserve Bank to raise rates in the near term, according a report by the NZ Institute of Economic Research released yesterday.

"It is quite common and quite healthy to have some consolidation after such a strong run," said Khoon Goh, head of market economics and strategy for ANZ New Zealand."There is still a lot of demand out there, and with the data flows as we head into the RBNZ meeting next week we are likely to see ongoing consolidation."

The kiwi dollar recently traded at 82.29 US cents, down from 82.44 cents yesterday, and was little changed at 71.02 on the trade-weighted index of major trading partners' currencies from 71.05 yesterday. It rose to 77.14 Australian cents from 77.01 cents previously, and fell to 67.01 yen from 67.25 yen. It rose slightly to 57.21 euro cents from 57.19 cents yesterday, rose to 50.02 pence from 49.93 pence previously.

Concern over Europe's ongoing sovereign debt crisis eased overnight after Greece appeared to have agreed to a tax cut with its international lenders, according to Reuters.

The market read that as a first of several austerity measures needed if the heavily indebted Mediterranean country is to avoid a debt restructuring or default. Sentiment was also helped by signs that German was easing its hard line stance on a debt restructuring.

Fonterra's GlobalDairyTrade auction was delayed by a day due to the end of the month changeover, and will take place tomorrow morning, according to a spokesperson at the dairy giant.

The kiwi may trade between a range of 81.90 US cents and 82.60, Goh said, and could gather enough momentum over the course of the day to test new highs.

"Based on what we've seen there is still solid demand" even if some people choose to book profits, he said.