KEY POINTS:
The New Zealand dollar continued to hold its own against the sluggish greenback today.
At 5pm the kiwi closed at US78.44c compared with US78.32c on Friday. Dealers said the local currency opened near a low of US78c, a hangover from weak equity markets on Friday.
But rumours that the US Federal Reserve might cut its interest rates during its meeting later this month improved sentiment towards riskier trades, taking it to a high of US78.67c.
Analysts said equity markets and US sentiment were key drivers.
"It's really about global growth expectations," Danica Hampton, a BNZ currency strategist, said.
"I think if people start to worry that a US recession will weigh on global growth then I think a high-yielding currency like the kiwi dollar will underperform, and we might well see the kiwi dollar make a sharp crash into the downside.
"But if people think the Fed's actions will help the US economy dodge a recession and global growth will hold up okay, the very wide kiwi-US interest rate differential could well see the kiwi test its December high of US79.36c."
The kiwi also benefited from a strong lift in the neighbouring Aussie dollar, which has been boosted by expectations of further central bank rate rises and a lift in the price of gold, which peaked just below US$900 an ounce.
The aussie climbed 0.7 per cent to US89.61c compared with US88.90c at the open, and was well up on Friday's close of US87.58c.
The kiwi appeared unaffected by fresh data showing further cooling in the New Zealand housing markets. November building consents are down 4.9 per cent on a year earlier , and Quotable Value figures for December showed annual house price growth easing to 10 per cent, the fourth monthly drop in a row.
Data out this week includes a Q4 survey of business opinion by the NZ Institute of Economic Research out tomorrow, fourth-quarter inflation data on Thursday and November retail sales on Friday.
Offshore, the euro rose slightly to US$1.4808, back near a five-week peak of $1.4825 earlier in the month.
The US is expected to drop interest rates later this month by half a point to 3.75 per cent and the UK is expected to trim rates in February, while Australia is expected to raise its rates from 6.75 per cent.
Markets in Japan were closed for a holiday, but t he greenback slipped to 108.78 yen .
Currency rates at 5pm Monday:
NZ dlr/US dlr US78.44 US78.32
NZ dlr/Aust dlr A87.59c A87.58c
NZ dlr/euro 0.5297 0.5288
NZ dlr/yen 85.34 85.54
NZ dlr/stg 40.05 39.90p
NZ TWI 72.20 72.12
Australian dollar US89.53c US89.43c
Euro/US dollar 1.4808 1.4810
US dollar/yen 108.79 109.22
- NZPA
