The New Zealand dollar today backed off last night's fresh post-float high ahead of tomorrow's interest rate call after Finance Minister Michael Cullen expressed concern about its strength.
The kiwi closed at US73.79c compared with US73.67c at 5pm yesterday, having traded in a US73.58c to US74.02c range today. The kiwi hit a fresh 22-1/2 year high of US74.04c during last night's offshore session on prospects of a Reserve Bank rate hike tomorrow and a weaker US dollar.
It had been trading around US74c today until Finance Minister Michael Cullen, now in Melbourne, said the kiwi's strength was "a very real concern".
"Let's see whether that's temporary or not, whether it's a blip in advance of a Reserve Bank announcement, which you sometimes see," Dr Cullen told Reuters.
W hile there was little the government could do to influence the kiwi, the Reserve Bank had some limited resources it could use where it saw a risk to systemic stability.
ANZ Investment Bank chief forex dealer Murray Hindley said the kiwi "lost a little bit of ground" after Dr Cullen's comments.
But he didn't see the kiwi trading in a big range tonight, before tomorrow's Reserve Bank Monetary Policy Statement.
"It depends how the offshore market digests those Cullen comments. "
The market is divided on whether the Reserve Bank will raise interest rates or leave them unchanged. The kiwi could hit US75c if the bank hikes by 25 basis points to 6.75 percent, and issues a hawkish accompanying statement.
Elsewhere, the greenback was buying 104.69 yen (104.98), and the euro was buying $US1.3340 ($US1.3228). The greenback's short term progress is now likely to depend on trade data on Friday.
The Australian dollar was trading at US79.74c (US79.38c).
On the crosses, the kiwi was buying A92.58c (A92.87c), 0.5533 euro (0.5569), 38.28 British pence (38.46), 77.24 yen (77.35), and 0.8581 Swiss francs (0.8647).
The Trade-Weighted Index was at 70.93 (71.12), and the monetary conditions index was at plus 1077 (1088).
On the money markets, 90-day bank bill yields were static at 6.92 percent, July 2009 bonds were unchanged at 6.25 percent, and April 2015s were at 6.13 percent (6.11).
- NZPA
<EM>Currency:</EM> Cullen talks kiwi down ahead of rate call
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