Currency: Kiwi takes breather in wake of yuan revaluation

The New Zealand dollar traded sideways today as forex markets cooled off a bit after the spurt of activity accompanying the revaluation of China's currency on Friday.

At 5pm in Wellington, the kiwi was buying US68.43c from US68.39c at 8.30am today and US68.69c at 5pm on Friday.

The kiwi kicked to a three week late of around US68.80c last Thursday after China announced it would peg its currency the yuan or renminbi to a basket of other currencies rather than just the US dollar.

But today's session for the kiwi had been fairly quiet, BNZ currency strategist Sue Trinh said.

"Everyone's taking a bit of a breather after the volatility late last week."

Ms Trinh said the kiwi had traded a reasonably tight US68.27c to US68.48c range today.

"There's been very little interest from Asian names and that has led to a very range-bound kiwi on our day.

"The market is still largely trying to digest the implications of the Chinese revaluation.

"For now they appear to be interpreting that as bullish for commodity prices which is a positive for the kiwi -- for now.

"We're pretty sceptical of the persistence of that trend and we are still firm believers that the ultimate currency adjustment for the kiwi will be lower in the medium term.

Ms Trinh said the focus for the kiwi now would be the Reserve Bank of New Zealand's (RBNZ) interest rate review on Thursday. Most of the market expects RBNZ governor Alan Bollard to keep the official cash rate unchanged at 6.75 per cent.

Meanwhile, at 5pm in Wellington, the greenback was fetching 111.56 yen (111.13 at 5pm on Friday), the euro was at US$1.2053 (US$1.2174) and the aussie was buying US76.34c (US76.48c).

On its crosses this evening, the kiwi was buying A89.82c (A89.81c), 0.5679 euro (0.5641), 39.39 British pence (39.19), 0.8878 Swiss francs (0.8821) and 76.034 yen (76.30).

Elsewhere, the TWI was at 69.35 (69.27) and the monetary conditions index steady at plus 976.

On the money markets, 90-day bank bill yields were at 7.03 per cent (7.04), July 2009 bond yields were at 5.84 per cent (5.89), and April 2015s were at 5.84 per cent (5.83).

- NZPA