The New Zealand dollar recovered on Thursday from a brief sell-off in reaction to data showing a contraction in the economy, while the Australian currency hit six-week highs against a broadly weaker greenback. The kiwi rose to as high as $0.7472 after a brief fall to below $0.7400 in immediate reaction to data showing New Zealand gross domestic product fell 0.2 percent, the first negative reading in six quarters.
The fall was halted as local banks started buying on dips, and as some in the market covered short positions, traders said. The market was now pricing 58 basis points worth of tightening over the next 12 months, down from 61 bps before the data. The recovery in the kiwi knocked the Aussie off a 10-year high of NZ$1.3505 set just after the NZ GDP data. It was last at NZ$1.3448.
Buoyed by strong commodity prices, a booming labour market and a growing economy, the Australian dollar climbed to six-week highs at $1.0033. It last traded at $1.0032. Support for the Aussie is seen from $0.9840, with resistance now at its 28-year high around $1.0182 set in November.