NZ dollar stable after big drop

19:40, Feb 27 2013

The New Zealand dollar stabilised against major currencies overnight after being hit earlier in the week by global dismay over the inconclusive Italian election outcome.

The kiwi recently traded at US82.35 cents, down from US82.50 cents at 5pm on Wednesday. On the Trade Weighted Index of major trading partners' currencies it was at 75.41, down from 75.60 last night.

After topping US85c earlier this month the New Zealand dollar plunged almost a cent overnight on Tuesday, as speculators who had been betting on further rises in the kiwi conducted an overdue cleanout.

Westpac market strategist Imre Speizer said the kiwi tracked sideways as global equity markets rose one per cent last night following improved European and US economic data.

However the bounce was also a rebound after the vicious selling off of the past few days.

''Global stock markets really drive the kiwi more than anything else,'' he said. 'The kiwi didn't actually do much, it hovered in the US82.25c to US82.66c range.''

Markets had plunged in recent days after the inconclusive Italian election outcome, he said. ''The Italian election scared the bejeezus out of global markets, all markets... and positioning in the kiwi was mega-long.''

The European Stoxx 600 index closed at 287.17 up 0.90 per cent, while the S&P 500 was at 1513.35, up 1.1 per cent.

The kiwi recently traded at 80.74 Australian cents, up from A80.63 last night. It was at 62.87 euro cents, down from 63.12 at 5pm Wednesday.

Against the British pound it was at 54.43 pence, down from 54.57p last night, while against the Japanese yen it was at 75.68, down from 75.81 at 5pm.

The New Zealand currency was expected to trade between a range of US82.20c and US83.00c today, Speizer said.

''Things do look a little bit more gloomy for the kiwi over the next few days at least.''