KEY POINTS:
The New Zealand dollar retreated yesterday from an overnight rise, mainly due to US dollar weakness.
The US dollar hovered near a record low against the euro as investors braced for a US interest rate cut next week, but rose against the yen amid political and economic uncertainty in Japan. Against a basket of major currencies, the greenback languished near a 15-year low and hit a 30-year trough against the Canadian dollar.
The kiwi hit 2 1/2-week highs against both the greenback and the yen overnight, while continuing to climb away from year lows against the Australian dollar and euro earlier this month. But by the close of trade yesterday, it had eased back to US71.19c from its opening of US71.90c. It was still ahead of Thursday's US70.98c close.
The ANZ bank said that weaker retail spending data released on Thursday, with the Reserve Bank's decision to hold interest rates, were insignificant compared with the moves and flows from abroad.
Yesterday's monetary policy statement was supportive of the dollar with the prospect of a rate cut diminishing further into the future.
The US dollar's woes remain the main focus after the currency tumbled to a record low versus the euro on widespread expectations for the Federal Reserve to start cutting interest rates next week.
The squeeze in money markets and signs of a deeper US housing downturn have convinced market players the Fed will cut rates next week by at least 25 and possibly 50 basis points from 5.25 per cent.
The resilience of stock markets has made investors more comfortable putting on risky positions, which the New Zealand dollar is judged to be, on hopes the worst of the turbulence may be over.
Japan's Nikkei sharemarket was up 1.3 per cent. As a result, market players have favoured using the low-yielding yen as a cheap source of funds to buy higher-yielding currencies in the carry trade, such as the kiwi - a strategy that took a hit when the market volatility flared up last month.
- NZPA
