KEY POINTS:
The New Zealand dollar closed the local session today above US76c mainly thanks to a softer US dollar and despite more haemorrhaging in equity markets.
Markets also took no note of an apparent signal by the Government that it might force the Reserve Bank to shift away from using interest rates as its sole monetary weapon.
Associate Finance Minister Trevor Mallard said the Government was open to alternatives "that best serve the modern economy".
Mr Mallard suggested the Reserve Bank's use of interest rates to control demand might be part of the problem rather than a solution.
Such a comment a few years ago would have put the forex market in a tizz with traders smacking their sell buttons repeatedly. But today they took no note and remained focused on relative interest rates.
The US dollar hit a two-month low against the euro after a report the previous day showed US private employers cut the most jobs in nearly six years and the Dow sank into bear market territory.
Such news reinforced investors' doubts about whether the Federal Reserve would raise interest rates very soon despite inflationary pressures from surging oil prices, and drag the dollar lower.
The euro, by contrast, was supported by market expectations for the European Central Bank to raise rates by 25 basis points to 4.25 per cent at a policy meeting tonight and possibly further beyond that.
"Reasons to sell the dollar are lined up," said a trader for a Japanese trust bank.
The Dow Jones industrial average sank into a bear market, closing more than 20 per cent below its October peak, while the local market plunged 2.2 per cent to take its losses since the start of June to over 13 per cent.
The NZ dollar held steady against the Australian dollar at A79.04c. The aussie continued to gain on the greenback after retail sales data yesterday soundly beat expectations for May, challenging the official view that interest rates were high enough to curb domestic demand.
It ended on US96.18c against US96.01c yesterday.
The NZ dollar trade weighted index held steady on 67.44.
- NZPA
