NZ dollar settles into narrow range

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The New Zealand dollar traded in a fairly narrow range today even though Reserve Bank of New Zealand (RBNZ) governor Alan Bollard said the currency was undesirably high.

The NZ dollar was at US79.50c at 5pm from US79.47c at 8am and US79.23c at 5pm yesterday.

Dr Bollard said that the NZ dollar had been pushed to undesirably high levels because of rising commodity prices but it was low against the Australian dollar.

He was speaking to a parliamentary committee after the central bank's semi-annual financial stability report in which the bank said the New Zealand banking system had strengthened.

Imre Speizer at Westpac said Dr Bollard's statement moved the currency slightly in afternoon trading but it was similar to statements by the governor earlier in the day.

Dr Bollard said at a press conference for the financial stability report earlier in the day that the NZ dollar had been surprisingly strong for some time.

"We think that it would be better for the New Zealand economy if the NZ dollar was not so high," he said.

Overall, investors were more comfortable with risk, Mr Speizer said.

"Global risk basically finished up on a strong note this morning and we have run with that," Mr Speizer said. But after a firm opening the New Zealand and Australian dollars had moved sideways today.

The buoyant global picture had encouraged demand for the likes of the NZ and Australian dollars at the expense of safe haven currencies such as the yen and greenback, BNZ said.

Despite that, the NZ dollar had been unable to sustain gains above the US79.60c level, perhaps reflecting a slide in the NZ dollar against the Australian dollar which was triggered by impressive Australian trade balance figures yesterday.

The NZ dollar was down to A73.19c at 5pm from A73.58c at 5pm, and was at 0.5523 euro from 0.5531 yesterday. It was at 64.24 yen from 63.69 yen yesterday.

The trade weighted index was 68.29 at 5pm from 68.18 yesterday.

- NZPA