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NZ dollar holds above 83USc

The New Zealand dollar held above 83USc in local trading today after global market euphoria abated on US politicians averting the $US600 billion fiscal cliff during the New Year holiday.

The kiwi rose to 83.21USc at 5pm in Wellington from 83.02USc at 8am, and was down from 83.73USc yesterday in Asia. The trade-weighted index decreased to 74.75 from 74.96.

Markets around the world rallied yesterday after US politicians reached a budget agreement of sorts to prevent automatic spending cuts and tax increases which would push the world's biggest economy back into recession.

That optimism has been tempered as investors now prepare for politicians to figure out where the spending cuts will come, and how they will address another looming debt ceiling.

The US had its triple-A credit rating cut by Standard & Poor's in 2011 over politicians' inability to make meaningful progress on the debt ceiling.

"We're now on the ledge waiting for the next cliff the politicians have made for themselves," says Mike Jones, currency strategist at Bank of New Zealand in Wellington.

"The good news is priced in and the risk is now for the kiwi to dribble lower."

New Zealand's currency gained in local trading after dairy prices rose 2% at the latest GlobalDairyTrade auction. The average winning trade-weighted price increased to $US3357 per tonne from $US3311/tonne at the December 19 sale.

The kiwi fell to ¥72.57 at 5pm in Wellington from ¥73.05 yesterday, and declined to 79.37Ac from 79.87Ac. The kiwi also advanced to €0.6331 from €0.6302 and was little changed at 51.28p from 51.37p.


More by Paul McBeth, BusinessDesk

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