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Bumpy Night For Kiwi Amid Debate About US Dollar's Future

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, March 26 NZPA - The New Zealand dollar had a bumpy ride overnight as the market was swayed by comments on the future of the greenback as the world's reserve currency.

By 8am today the kiwi was buying US56.21c, having dropped to around US55.55c last night, before racing up in the following hours to peak near US57.20c before falling away again.

BNZ Capital currency strategist Danica Hampton said most of the focus overnight was on whether the US dollar would be replaced by the International Monetary Fund's (IMF) special drawing rights (SDR) as a reserve currency of choice.

The possibility was raised by a Chinese official late last week and early in the night fears that central banks might shift their foreign reserve holdings from US dollars to SDRs weighed on the greenback, Ms Hampton said.

The combination of a generally weaker US dollar and solid demand for the NZ demand out of Japan was behind the climb of the NZ dollar to above US57c.

But the kiwi's strength did not last as US Treasury Secretary Timothy Geithner said the US dollar would remain the world's dominant reserve currency, sentiments echoed by the head of the IMF.

The kiwi gained against the Australian dollar, to A81.13c at 8am from A80.49c at 5pm yesterday, but slipped against the European and Japanese currencies.

It was at 0.4142 euro and 54.67 yen at the local open from 0.4161 euro and 54.85 yen. The trade weighted index was 55.79 at 8am from 55.74 at 5pm.

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