The New Zealand dollar initially rose overnight but then fell as stocks in the United States failed to hold onto early gains and the International Monetary Fund repeated its view that the kiwi may be overvalued by 10-25 percent.By 8am today the NZ dollar
The New Zealand dollar initially rose overnight but then fell as stocks in the United States failed to hold onto early gains and the International Monetary Fund repeated its view that the kiwi may be overvalued by 10-25 percent.
By 8am today the NZ dollar was down to US66.31c, having topped US67.40c a few hours earlier.
BNZ strategist Mike Jones said a cautious recovery in risk appetite was the main theme in currency markets overnight.
Amid pessimism about Europe's sovereign debt woes, a reminder that global economic activity remained on track provided some cheer, Mr Jones said.
Data reinforced optimism about a US recovery, while the OECD revised up its forecasts for global growth in 2010 and 2011.
As equities and commodity prices pared some recent losses, investors dipped their toes back into risk-sensitive currencies such as the NZ dollar, which climbed against the greenback.
But the highs of the NZ dollar did not last long, with US stocks failing to hold onto earlier gains and the IMF repeating its view about the New Zealand currency being overvalued.
Knee-jerk reaction to the comments saw the NZ dollar slip back against the US currency, Mr Jones said.
BNZ agreed the NZ dollar was overvalued in a long-run sense, but that should have relatively little bearing on short term movements by the kiwi.
A typical NZ dollar upswing against the US dollar lasted three to five years with the currency usually topping out 20-25 percent above "fair value".
The NZ dollar was also down to 59.65 yen at 8am from 60.02 at 5pm yesterday, and dropped to A80.58c against the Australian dollar from A80.82c at yesterday's local close.
The kiwi edged up to 0.5440 euro at the local open from 0.5416 at 5pm, while the trade weighted index dropped to 64.80 at 8am from 64.96 at 5pm.
