The New Zealand dollar traded sideways today, despite tough-talking comments from Finance Minister Michael Cullen that the unit is at an unsustainable level and may fall sharply.
The kiwi took the comments in its stride, closing at US70.21c, largely unchanged from its US70.23c local open.
Dr Cullen, reappointed last week for a third term as finance minister, told Reuters that the New Zealand economy was unbalanced, resulting in the external accounts falling deeply into deficit.
Domestic consumption had continued at high levels, requiring high interest rates and underpinning the currency, he said.
Dr Cullen said there was excessive faith in the level of the New Zealand dollar and a sharp depreciation was possible.
Overseas investor demand for New Zealand dollar-denominated bonds -- eurokiwi and uridashi -- was "pretty weird" and "not exactly rational" given New Zealand's current account deficit was at 8 percent of gross domestic product, Dr Cullen said.
The kiwi has eased from March's 23-year high, but remains at near 8-1/2 year highs.
Reserve Bank governor Alan Bollard is widely expected to hike the country's official interest rate by 25 basis points to 7 percent on Thursday, maintaining the rate at the highest level in the industrialised world.
Offshore, markets today warmed to the nomination of White House adviser Ben Bernanke as Fed chairman, reassured that he backed a slow but steady rise in US rates.
The following are Reuters currency rates:
NZ dlr US70.21c US70.33c
NZ dlr/Aust dlr A93.57c A93.50c
NZ dlr/euro 0.5865 0.5840
NZ dlr/yen 81.06 81.05
NZ dlr/stg 39.74p 39.60p
NZ TWI 71.80 71.76
Australian dollar US75.03c US75.15c
Euro/US dollar US1.1972 US1.2040
US dollar/yen 115.45 115.64
- NZPA
<EM>Currency:</EM> Kiwi ignores Cullen comments, trades flat
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