Kiwi pares loss as buyers emerge for cheap Aussie dollar

NZ dollar pares loss as buyers emerge for cheap Australian currency

The New Zealand dollar recovered from a fresh six-week low after buyers came out of the woodwork when they saw the Australian dollar dropped below parity with the greenback, spurring demand for a cheap entry point.

The kiwi was little changed at 76.16 US cents at 5pm from 76.26 cents at 8am, though it was still down from 76.68 cents yesterday. The currency touched a fresh six-week low of 75.78 cents during local trading.

Investors took the opportunity to buy into the trans-Tasman currencies after a weak Spanish bond auction heightened fears about Europe’s ability to meet its debt obligations and sapped demand for higher-yielding, riskier assets, which European sovereign bonds are fast becoming. That saw the Australian dollar dip below parity with the US dollar, and local buyers used that as an opportunity to buy the currency at a bargain compared to recent times.

“At 99.50 US cents (the Australian dollar) has attractive demand and that’s what we’ve seen, good domestic demand,” said Alex Hill, senior currency strategist at HiFX. The demand for the Australian dollar stoked “more US dollar selling, and with that we’ve seen the kiwi come back.”

Investors moved out of the trans-Tasman currencies in New York and London trading overnight as Europe’s debt woes edged out any optimism over the potential improvement in the Australasian economies.

Hill said the Australian and New Zealand dollars were hit harder than other currencies, as they tend to be early movers when investors’ appetite for high yields changes.

“We’re just going to get dragged wherever other currencies go,” he said.

The kiwi dollar rose to 76.16 Australian cents from 75.66 yesterday, and fell to 58.56 yen from 58.99 yen yesterday. It declined to 56.40 euro cents from 56.67 cents yesterday and decreased to 48.29 pence from 48.57 pence.

The trade weighted index sank to 67.43 from 67.76 yesterday.

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