Dollar sags to near-decade low

The New Zealand dollar sagged to a new near-decade low against its trans-Tasman counterpart overnight after further evidence emerged of the robust state of the Australian economy.

Figures out yesterday showed the Australian economy grew 0.9 percent last quarter. That followed the Reserve Bank of Australia's (RBA) decision on Tuesday to lift interest rates, taking the official rate across the Tasman to 150 basis points above the level in this country.

Early today the kiwi fell to around A76.30c, its lowest level since November 2000, and by 8am had only managed to get back to A76.68c, still well down on the A77.10c at 5pm yesterday. Just a month ago the NZ dollar had been above A80c.

BNZ strategist Mike Jones said yesterday's GDP data, which showed Australian growth picked up to 2.7 percent year-on-year, underscored the RBA's view the Australian economy was running close to trend.

The contrast with this country was obvious, with annual GDP growth here expected to print closer to flat in the fourth quarter, Mr Jones said.

So, despite a generally upbeat night for risk-sensitive currencies, the weakness of the NZ dollar against the aussie was again the New Zealand currency's "ball and chain" against the greenback.

ANZ bank said that with the Australian dollar clearly the favourite to win the "most attractive yield" and probably the "best performing economy", the NZ dollar's cross with the aussie could only move one way.

The key A76.92c level gave way overnight and had resulted in a quick drop.

Even as the United States dollar slipped broadly as safe-haven demand fell, the NZ dollar eased against the greenback to be at US69.56c around 8am from US69.70c at 5pm.

The NZ dollar was down to 0.5070 euro at the local open from 0.5110 at 5pm, having dropped to a three-week low around 0.5050 overnight.

The kiwi also dropped to 61.52 yen from 61.81 at the local close, and tumbled further against the British pound to around 46p, having been close to a quarter century-high 47p early on Tuesday. The trade weighted index fell to 64.04 at 8am from 64.39 at 5pm.

- NZPA