Dollar near two-month high on yen

NZ currency - open

The New Zealand dollar made modest gains against the greenback and reached its highest level against the euro in 21 months as well as a two-month high against the yen overnight.

By 8am the kiwi was buying US73.64c from US73.37c at 5pm yesterday, with the US dollar falling versus the euro and commodity currencies as steady stock prices spurred investors to buy higher-yielding assets at the expense of the low-yielding greenback.

The NZ dollar reached 0.512 euro last night but by today's local open was down to 0.5112, little changed from its 5pm level.

Early today the kiwi also reached around 68.20 yen, then it edged lower to 68.12 yen at 8am which was still well up on the 67.39 yen at the local close.

The yen came under pressure after news of Finance Minister Hirohisa Fujii's resignation. His departure could add to the challenges for the Japanese government as it wrestles with deflation, a fragile economy and huge public debt.

The US dollar also rose against the yen after the Institute for Supply Management said its US services index rose to 50.1 in December, reaching above the 50 mark separating expansion from contraction for the third time in four months.

BNZ Capital senior strategist Danica Hampton said an optimistic global backdrop had encouraged short term speculative players to buy growth sensitive currencies such as the NZ dollar, particularly against the yen.

A challenge of last year's 69.80-yen high looked likely in coming weeks, she said.

The following are Reuters currency rates:
(Today 8am - Wednesday 5pm)

NZ dlr US dlr US73.64c - US73.37c

NZ dlr Aust dlr A80.07c - A80.27c

NZ dlr euro 0.5112 - 0.5109

NZ dlr yen 68.12 - 67.39

NZ dlr stg 46.00 - 45.89

NZ TWI 66.82 - 66.75

Aust dlr US dlr 91.91 - 91.36

Euro US dlr 1.4411 - 1.4355

US dlr yen 92.49 - 91.88

- NZPA