Dollar mixed after rate decision

The New Zealand dollar had a mixed session today and ended up reacting more to US President Barack Obama's state of the union address than to the latest Reserve Bank of New Zealand (RBNZ) decision on interest rates.

Dealers said the NZ dollar rose slightly after the RBNZ kept rates unchanged at 2.5 per cent, as expected, in an announcement at 9am.

The NZ dollar was US70.99c by 5pm from US70.52c at 8am and US70.75c at 5pm yesterday.

It fell when the euro came under pressure to a low around US70.40c and rose to US70.90c over a period of about an hour when Mr Obama's address was seen as having a positive tone.

Imre Speizer, currency strategist at Westpac, said general risk aversion was affecting the euro and other currencies, including the NZ dollar.

"The Obama speech is probably the biggest driver of the currency of the day," he said. "Investors liked the general tone of the speech," he said.

Investors are also waiting for a speech on monetary policy by RBNZ governor Alan Bollard tomorrow at 1pm.

Mr Speizer said there were small changes in the short RBNZ statement announcing the interest rate decision today.

"There were a couple of subtle shifts toward the hawkish end of things," he said.

Dr Bollard said: "If the economy continues to recover, conditions may support beginning to remove monetary stimulus around the middle of 2010."

The NZ dollar rose to 0.5062 euro by 5pm from 0.5026 at the same time yesterday. It was at A78.73c at 5pm from A78.43c yesterday and at 64.11 yen from 63.09 yen.

The trade weighted index was 64.97 from 64.55 yesterday.

- NZPA