NZ dollar makes up some lost ground

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The New Zealand dollar managed to make up some lost ground as markets calmed down after the bout of risk aversion earlier in the week.

Around 8am the NZ dollar was buying US78.79c against the greenback, having dropped to a low around US78.20c yesterday evening.

Early on Monday it had briefly topped US80c for the first time in three years.

ANZ bank said the investigation of support levels for the NZ dollar during the local session yesterday had been countered by familiar demand in the offshore session.

Trading on global markets overnight had been much calmer, with risk coming back into favour, ANZ said.

A tumble in global equities yesterday and overnight Monday had been sparked by mounting fears about the future of Greece's massive debt and Standard & Poor's threat to cut the United State's blue chip AAA credit rating.

ANZ said technically the NZ dollar should continue to consolidate around current levels with marginal ability for now to extend towards the topside.

The euro rebounded against the US dollar, which also fell against the yen, as strong economic data reassured markets about growth in major euro zone countries, despite the mounting fears that Greece may have to restructure its debt.

The health of bigger euro zone countries suggest interest rates in the bloc, which rose this month, could move higher to counter price pressure.

That was not as clear in the US, which has yet to begin monetary tightening, while Japanese rates were expected to remain low as it rebuilt after a huge earthquake and tsunami.

Blemishes on both the US dollar and the euro were expected to continue boosting the comomdity sensitive Australian dollar, which topped the $US1.05 psychological level, near 29-year highs.

The NZ dollar was little changed from its 5pm level against the aussie, buying A74.91c at 8am, while slipping to 0.5499 euro at 8am from 0.5517 at 5pm, and rising to 65.01 yen from 64.70. The trade weighted index was up to 68.41 at 8am from 68.35 at 5pm.

- NZPA