$NZ drags the $AUD

Submitted by Share Trading on 23 December, 2005 - 16:09

The Australian dollar opened weaker on Friday as negative sentiment from the New Zealand unit spilled over into local currency trade.

At 7am (AEDT), the local currency was trading at US73.12¢, below Thursday's close of US73.27¢.

During overnight trade, it hit a high of US73.34¢ and a low of US73.01¢.

National Australia Bank currency strategist John Kyriakopoulos said the local currency failed to cash in on a weaker US dollar, which fell against the major currencies.

"The US dollar is a bit weaker because of some tame inflation readings so it's weaker against most currencies, particularly the yen and the euro to a lesser extent," Mr Kyriakopoulos said.

"And the Aussie didn't really get a great deal out of that - it's weaker on all the crosses except the New Zealand dollar, which has its own problems at the moment."

This week, New Zealand reported a poor current account deficit and weak September quarter gross domestic product growth.

"Some of the kiwi weakness has flowed though to the Aussie - the idea that the high yielders are becoming a little bit on the nose at the moment," he said.

"Just the idea that with interest rates going up in Japan and the euro zone next year, the high yielders won't be as favoured."

The Australian overnight cash rate is currently at 5.50 per cent while the New Zealand rates is at 7.25 per cent.

And a rise in the price of gold to back above $US500 an ounce overnight also failed to support the Australian dollar.