Currency: Dollar up after RB statement

The New Zealand dollar closed stronger today after the Reserve Bank left interest rates unchanged as expected.

Although bank governor Alan Bollard signalled the end of the tightening cycle he also said he did not see rates coming down in the foreseeable future.

ANZ Investment Bank chief dealer Murray Hindly described the statement as "mildly hawkish".

While Dr Bollard ruled out rate cuts, he refused to fully close the door on any more rate rises, saying "this possibility cannot be ruled out until we see clear evidence of a sustained weakness in domestic demand".

Westpac economists said the statement seemed to underplay the extent of the economic slowdown.

The kiwi traded up to US68.83c but closed on US68.78c compared with US68.23c at yesterday close. Mr Hindley said the kiwi could trade up to US69.20 before it was likely to meet selling pressure.

Buying came out of Asia today with Australia off for its national day holiday.

The kiwi made mild gains on most cross rates except the yen and the Australian dollar where it fell to A90.70c from A90.84c. The aussie rose to US75.39c from US75.12c.

The US dollar slipped in cautious trade and stayed near four-month lows against the euro ahead of US growth data later this week and the Federal Reserve's upcoming policy meeting.

After tumbling sharply earlier this week on worries that the Fed may soon end its 18-month stretch of interest rate increases, the dollar had gained some traction the past two sessions as investors squared positions before the two events.

The yen suffered in particular during the dollar's rebound, falling across the board as Japanese investors, weary of near-zero interest rates at home, sought further refuge in higher-yielding currencies.

 

Rates:

5pm today 5pm Wednesday

NZ dlr/US dlr US68.78c US68.23c

NZ dlr/Aust dlr A90.70c A90.84c

NZ dlr/euro 0.5612 0.5563

NZ dlr/yen 79.41 78.57

NZ dlr/stg 38.50 38.29

NZ TWI 69.77 69.26

Australian dollar US75.39 US75.12

Euro/US dollar US1.2253 US1.2263

US dollar/yen 115.62 115.16

- NZPA