The New Zealand currency held firm today despite a Treasury forecast that a predicted economic slowdown would be sharper than previously expected.
After last week's 2 percent loss against the US dollar, the kiwi stayed above US68.85c today and at 5pm was buying US69.11c.
Today's steady showing followed a sharp fall on Friday against all currencies as investors quit the kiwi on fears of recession and expectations a two-year tightening phase is over.
Bank of New Zealand currency strategist, Sue Trinh, said the kiwi needed to hold above the US68.40c level to prevent a further steep correction.
During the day, the release of the Government's half-yearly economic and fiscal update predicted lower operating surpluses, reduced growth forecasts and increased borrowing as it expected expenses to rise and the tax take to fall.
Economic growth was forecast to slow to 1.7 percent in the year to March 2007 from the previous forecast of 2.6 percent, though forecast growth for the year to March 2006 was raised to 2.9 percent from 2.2 percent.
Finance Minister Michael Cullen acknowledged the country's economy might be about to "enter heavier waters".
The US dollar edged slightly lower against the yen during the day, at one point falling to 115.52, the lowest since late October.
Continued downward pressure came after last week, which was the greenback's worst against the Japanese currency in six years as investors rushed to buy back the yen before the year ends.
The yen soared during the week, especially against high-yielding currencies such as the New Zealand and Australian dollars, as investors took profits on bets against the Japanese currency and forced others to cover huge short positions.
The massive unwinding of so-called carry trades -- borrowing yen and selling it for higher-yielding currencies -- sent the US dollar tumbling 4.25 percent against the yen last week and drove the kiwi down nearly 6 percent versus the yen.
About 5pm the kiwi was buying 80.38 yen, compared to 79.85 yen on Friday evening, A92.60c up from A92.40c, and 0.5754 euro from 0.5762.
Currency rates:
5pm today 5pm Friday
NZ dlr/US dlr US69.11 US68.85
NZ dlr/Aust dlr A92.60 A92.40
NZ dlr/euro 0.5754 0.5762
NZ dlr/yen 80.38 79.85
NZ dlr/stg 39.03 39.05
NZ TWI 70.78 70.63
Australian dollar US74.63 US74.52c
Euro/US dollar US$1.2010 US$1.1950
US dollar/yen 116.29 116.06
- NZPA
<EM>Currency:</EM> NZ dollar holds steady despite predictions of sharper decline
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