NZ Dollar mixed, rate decision awaited

The New Zealand dollar eased today as the yen rose in response to speculation of a tightening of Chinese monetary policy.

The NZ dollar had been rising slightly but late in the day stories citing banking sources said several Chinese banks will see extra reserve ratios take effect on Tuesday. This caused the yen to rise and other currencies to fall.

The NZ dollar fell sharply last week when investors' appetite for risk was reduced by concerns about a tightening in monetary policy in China and bank regulation in the US.

The NZ dollar was trading at US71.11c at 5pm from US71.44c at 8am and US71.55c at 5pm yesterday. Trading was reduced today by the Australia Day holiday.

"This week we may see a minor rebound over the next few days, followed by a resumption of a risk reduction," Westpac Institutional Bank said.

Westpac expects little change in the language accompanying Thursday's interest rate decision by the Reserve Bank of New Zealand.

Investors are also eyeing a speech on monetary policy by Reserve Bank Governor Alan Bollard on Friday.

"The coming week is packed full of event risk, which should help steer the direction of currency markets. The Senate is expected to vote on whether to reappoint (Federal Reserve chairman Ben) Bernanke for a second term and US President Barack Obama will give his State of Union speech on Thursday. We're also slap bang in the middle of the US corporate earnings season - companies like Apple, Amazon, Boeing and Microsoft are all reporting this week," BNZ senior strategist Danica Hampton said.

Against the Australian dollar, the NZ dollar was trading at A78.88c, from A78.90c at 5pm yesterday. It was down against the yen, at 63.96 from 64.46 yesterday.

The TWI was at 64.95, down from 65.22 at 5pm yesterday.

- NZPA