KEY POINTS:
The New Zealand dollar returned above US77c today, but was unable to break out of its recent range.
By 5pm, the kiwi was at US77.21c, up from yesterday's US76.47c close and an overnight low on Friday of US75.91c.
Against the Australian dollar, the kiwi rose to A83.65c from A83.01c late yesterday.
For most the last week, the NZ dollar has stuck within a US2c range, topped by US77.50c. The currency has been underpinned by a weaker US dollar and a widening spread in interest rates between New Zealand and the US, as downward pressure grows on US interest rates and the outlook becomes dovish on US Fed interest rate policy.
"Nonetheless, the NZD/USD has failed to break above US77.40c," said Bank of New Zealand currency strategist Danica Hampton.
"Some real-money NZD selling has also been noted from Japanese investors and macro accounts."
The kiwi has been weak against the Australian dollar ahead of an expected interest rate hike tomorrow to 6.75 per cent, but has bounced off its year-low last week of A82.75c.
Interest rates on this side of the Tasman look set to remain at least at current levels for the forseeable future, following stronger than forecast wage data yesterday. Data on Thursday is expected to show further employment growth in an already very tight labour market.
While the kiwi has room to rise before it starts to look expensive, according to the BNZ's reckoning of fair value of US76.48c to US78.48c, it is likely to remain pinned near current levels due to nervousness about strife in the US financial sector.
The largest US bank, Citigroup, said at the weekend it might take an additional US$11 billion ($14.6 billion) write-down for subprime losses, on top of US$6.5 billion it wrote off three weeks ago. Its chief executive officer Charles Price has stepped down, and its pristine credit rating has been downgraded.
-NZPA
