NZ dollar pushes back toward 81USc

The New Zealand dollar dipped sharply today but was back near recent highs as the session ended while the US currency slipped to a fresh three-year low.

The NZ dollar was at 80.76USc at 5pm from 80.84USc at 8am and 80.69USc at 5pm yesterday.

It fell on pronouncements by the US Federal Reserve in the early hours of the morning and again when the Reserve Bank held the official cash rate at 2.5% at 9am. The RBNZ indicated the level was appropriate for some time, given the economic disruption of the earthquakes in Christchurch.

But the NZ dollar recovered as the Australian dollar rose to a fresh 29-year high.

ASB said the brief statement by the RBNZ suggested it was more comfortable the wider economy would hold up despite the earthquake.

In particular, the RBNZ noted the pick up in housing market turnover and business investment outside of Christchurch. It was upbeat on the agricultural outlook but the high NZ dollar and oil prices were seen as unwelcome.

ASB said the 0.7USc drop in the currency immediately after the statement was a bit of an overreaction, given the decision to hold was unanimously expected.

"The RBNZ language surrounding the level of the NZ dollar does not suggest to us that intervention is on the cards," ASB said.

The NZ dollar briefly topped 81USc for the first time in more than three years yesterday afternoon, then fell away overnight as Federal Reserve chairman Ben Bernanke gave little indication that the central bank was close to tightening monetary policy.

Investors have pointed to loose Fed policy as a source of US dollar weakness. Mr Bernanke told reporters at a briefing that a strong US dollar was in the US interest but said the central bank could best ensure a strong currency by creating the conditions for solid growth.

"In our view, if we do what's needed to pursue our dual mandate for price stability, maximum employment, that will also generate fundamentals that will help the (US) dollar in the medium term," he said.

The NZ dollar slipped to €0.5434 at 5pm from €0.5494 at the same time yesterday, but rose to ¥66.00 from ¥65.81, while easing to 73.85Ac from 74.44Ac yesterday. The trade weighted index slipped to 68.66 from 69.