Dollar recovers ground after OCR hold

The New Zealand dollar recovered some of the ground it lost against the greenback after yesterday's interest rate decision, then traded in a narrow range.

In its decision yesterday that it was keeping the official cash rate unchanged at 2.5 per cent, the Reserve Bank expressed concern about the impact of the rising NZ dollar on economic recovery.

By 8am the kiwi was buying US65.20c, after climbing from a lowpoint around US64.75c late yesterday morning.

For most of the time between 7pm and 8am it was in a band between US65.15c and US65.40c

The partial recovery by the NZ dollar against the greenback came as the US currency slid against major currencies as global stocks and commodities rebounded on optimism about an economic recovery worldwide.

The NZ dollar also showed signs of recovery against the European and Japanese currencies but fell further against the Australian dollar.

The kiwi troughed early today at a four-week low below A78.80c and by 8am had recovered only slightly to A79.05c from A79.44c at 5pm yesterday.

BNZ Capital senior strategist Danica Hampton said traders and analysts were trumpeting the contrast in commentary between the respective central bank governors - Alan Bollard in this country and Glenn Stevens across the Tasman.

In an upbeat speech on Tuesday, Stevens said the risks to the Australian economy were now more balanced, and that low rates could inflate a housing bubble.

In contrast yesterday, Bollard said the New Zealand economy remained weak and the outlook was highly uncertain.

ANZ said that despite the Reserve Bank's messages the NZ dollar remained coupled with wider global sentiment and risk appetites.

"With Wall Street up strongly overnight on better economic data and further positive earnings surprises...and commodities rebounding strongly after yesterday's tumble, the kiwi naturally found some buying interest."

The NZ dollar was buying 0.4635 euro at the local open from 0.4623 at 5pm and was up to 62.27 yen from 61.67. The trade weighted index was 61.11 at 8am from 61.01 at 5pm.

- NZPA