It was a bit of a struggle for New Zealand dollar last week, as it was for the other commodity-related currencies.

The Kiwi lost a cent and a quarter to the US dollar and four cents to the pound. It was almost unchanged against the Australian dollar. 

Underlying its relative weakness was the renewed nervousness of investors about peripheral Europe and their consequent reluctance to become any more involved with "risky" currencies. Allegations of corruption in the Spanish prime minister's office and a resurgence in the electoral popularity of Silvio Berlusconi in Italy gave rise to concern about changes of government that could mean the abandonment of deficit-reduction measures and a re-escalation of the eurozone sovereign debt crisis. 

Sterling and the US dollar both benefited from this change of emphasis but the pound had an extra advantage. The Bank of England governor-designate made clear that he did not believe it would be a good idea for the Bank to move away from targeting inflation. Investors were relieved to hear it and so was the pound.