Kiwi dollar falls

The New Zealand dollar fell today after the Reserve Bank expressed concern about the impact of the rising NZ dollar on the economic recovery.

The central bank kept its official cash rate unchanged at 2.5 per cent.

But it said the forecast recovery is based on a further easing in financial conditions.

"If this easing does not occur, the forecast recovery could be put at risk. In these circumstances we would reassess policy settings."

Goldman Sachs JBWere New Zealand strategist Bernard Doyle said this was an implicit threat that further NZ dollar strength will be met with a rate cut.

The NZ dollar fell to US64.70c after the announcement but rose to US64.95c by 5pm. It was US65.85c at 5pm yesterday.

Deutsche Bank economists said the central bank's threat to ease policy further in response to the NZ dollar was nonsensical.

"We think that over-stimulating the domestic economy is a recipe for near-term currency strength, not weakness."

BNZ's Tony Alexander said the central bank has talked the currency down before and it has gone back up again.

Otherwise the US dollar market was influenced by speculation about China's monetary policy.

The US dollar trimmed gains in Asian trading today after China's central bank said it would stick to a loose monetary policy to consolidate China's economic recovery, Reuters reported.

The NZ dollar was lower against European and Australian currencies, easing to 0.4623 euro at 5pm from 0.4645 yesterday, and to A79.44c from A79.68c.

The NZ dollar fell to 61.67 yen from 62.15 yen yesterday, while the trade weighted index eased to 61.01 at 5pm from 61.51 at the same time yesterday.

- NZPA