NZ dollar recovers but expected to be volatile

November 30 - Close

The New Zealand dollar rose today as the bout of risk aversion triggered by Dubai's financial woes subsided.

The NZ dollar was at US72.11c at 5pm from US71.39c at 8am and US71.05c at 5pm on Friday.

ASB said the full impact of the financial crisis in Dubai was still being assessed by investors and the NZ dollar would continue to be driven by offshore themes such as this.

"The main issue boils down to whether or not Dubai World will default on its debts," ASB said.

There were also financial hot spots elsewhere, including Eastern Europe.

"Equity markets globally have rallied a long way this year and are pricing in a relatively trouble-free global recovery."

The events in Dubai highlighted the onging challenges for the global recovery and the fragile nature of market confidence.

Westpac said the NZ dollar could top US72c to US73c during the next few days.

"Thereafter we expect a downward correction to resume."

Westpac expects the NZ dollar to be volatile this week due to so-called event risk.

After falling below A78c against the Australian dollar for the first time in more than five months overnight on Friday, the NZ dollar managed to recover to A78.49c by 5pm.

From a 4½-month low of 59.85 yen last week, the NZ dollar was up to 62.47 yen by 5pm today.

Against the euro, the it lifted from a 2½-month low of 0.4713 at Friday lunchtime, to 0.4784 at 5pm.

The trade weighted index rose to 63.92 from 63.36 on Friday.

Reuters currency rates (5pm today - 5pm Friday)

NZ dlr/US dlr US72.11c US71.05c

NZ dlr/Aust dlr A78.49c - A78.60c

NZ dlr/euro 0.4784 - 0.4757

NZ dlr/yen 62.47 - 61.13

NZ dlr/stg 43.48p - 43.35p

NZ TWI 63.92 - 63.36

Aust dlr/US dlr 91.84 - 90.39

Euro/US dlr 1.5073 - 1.4937

US dlr/yen 86.63-  86.02

- NZPA