KEY POINTS:
The New Zealand dollar held its ground after the Reserve Bank left rates steady yesterday, but softened later on the back of weak retail sales data.
By 5pm, the kiwi was at US70.98c from US70.65c late on Wednesday afternoon, having peaked near US71.60c early yesterday morning as the US dollar fell to a record low against the euro.
Reserve Bank Governor Alan Bollard kept rates at 8.25 per cent following four successive rises, but projected that rates will remain around current levels until 2010.
The kiwi was broadly flat around US71.20c/30c after the bank statement.
"The tone of the statement was fairly close to what people expected," said Westpac currency strategist Michael Gordon.
"The upside and downside risks were both put more strongly than I'd expected, but I think the compromise between those two means they were pointing to an extended period of rates on hold."
However, the kiwi dropped below US71c, triggering more selling, after July's flat retail sales against economists' forecast of a 0.2 per cent rise.
"The momentum of the domestic economy in particular is showing clear signs of slowing down after endless rate hikes," Gordon said.
The US dollar held above a 15-year low against a basket of currencies yesterday as investors took profits on its slide and waited to see how deeply the Federal Reserve might cut interest rates next week.
The Fed is widely expected to lower rates by 25 or 50 basis points from 5.25 per cent at Tuesday's meeting, a move that would erode the dollar's yield appeal. But traders said the US dollar was getting a slight lift in Asia.
- NZPA
