Dollar slips on Europe concerns

Last updated 08:56 05/02/2013

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The New Zealand dollar retreated from lofty highs against a basket of currencies overnight, with risk-off sentiment driven by political turmoil in Europe.

The Kiwi recently traded at US84.43 cents, down from US84.55c at 5pm yesterday, while on the Trade Weighted Index (TWI) of major trading partners' currencies it was at 76.10, down from 76.14.

The currency pared its gains overnight after reaching an all-time high on the Sterling cross, a strong position against the Australian dollar, and lofty heights on the TWI.

ASB Institutional head of FX sales Tim Kelleher said political turmoil in Europe had caused the kiwi to drift back slightly.

"It's hardly out of the woods, but a little bit of risk-off overnight is probably the answer."

European equities plunged and US stocks also suffered from a Spanish corruption scandal paired with Italian election polls favouring former PM Silvio Berlusconi, both of which refreshed fears about the stability of the euro zone.

Kelleher said the kiwi was looking a little heavy and would struggle to hold its ground ahead of the Reserve Bank of Australia's interest rate announcement this afternoon. The central bank is expected to keep rates on hold at the historic low of 3 per cent.

"I think those previous tops around US84.75c to US85.00c still cap it, so I wouldn't be surprised to see it move back toward US83.50c again."

In local news, he said the market would take leads from the Labour Cost Index and Quarterly Employment Survey this morning, which might hint at how jobs data due out on Thursday will shape up.

On the crosses, the New Zealand dollar recently traded at 80.91 Australian cents, down from A81.08c at 5pm yesterday, and 78.00 Japanese yen, from 78.44 yen earlier. The kiwi rose to 62.50 euro cents from 62.02 yesterday, and slipped to 53.57 pence from 53.85p earlier.

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