NZD meanders higher

December 18 - Close

The New Zealand dollar meandered higher in afternoon trading today but dealers said the move reflected trading in the US dollar.

By 5pm the NZ dollar was at US71.16c, up from US70.98c at 8am but still down from US71.51c at 5pm yesterday.

Traders said the firmness in the afternoon reflected some US dollar weakness after it had a good run higher this week, particularly against the euro.

The market is now winding down into holiday mode.

Next week New Zealand has balance of payments data on Tuesday and gross domestic product data on Wednesday, both for the September quarter, but the focus of investors may be on Christmas festivities.

The US dollar has traded to 3-1/2 month highs against the euro this week as traders unwound short, or sold, positions ahead of the year-end. The Federal Reserve this week highlighted improvement in the US economy and stood by plans to stop most emergency lending by February.

The NZ dollar also fell to 63.72 yen by 5pm from 64.33 at the same time yesterday, and to 0.4944 euro from 0.4957 yesterday.

After reaching a month-high A80.35c earlier against the Australian dollar it was A80.04 at 5pm, little changed from yesterday. The trade weighted index fell to 64.77 from 65.00 yesterday.

ANZ bank said end of year position squaring looked to be gaining a head of steam. The clear beneficiary had been the US dollar and US bonds, while the clear losers were risky assets and high yielding currencies such as the NZ and Australian dollars.

It may not be long before the US70c level came under a real test for the NZ dollar, and in the liquidity starved mid-December to mid-January period, big moves could be made on small volumes.

- NZPA