Comments by Reserve Bank Governor Alan Bollard that he was not uncomfortable with the New Zealand dollar's fall gave it another nudge lower today.
The kiwi dropped from US62.35c just before the remarks to close on US62.20c. It closed yesterday at US62.47c.
"The market has reacted to the headline comment," said ANZ Investment Bank chief dealer Murray Hindley.
He said there was little new in the comments but the market took it as sanctioning the kiwi's move lower.
Dr Bollard told Reuters wanted to bring about a soft landing for the economy while keeping inflation in check.
He also said he was comfortable with a decline in the issuance of New Zealand dollar-denominated bonds which has helped knock the country's currency lower.
An economic slowdown was underway but the central bank has maintained tight monetary policy to combat persistent inflation pressures in some sectors.
Dr Bollard said highlighting the risks of New Zealand dollar denominated bonds -- eurokiwi and uridashi -- last year with foreign investors had helped to curb enthusiasm for such investments.
"As it happens it's been followed up with fewer uridashi issuances, and we're not uncomfortable with that," Dr Bollard said, adding he was also "not uncomfortable" the kiwi dollar had also fallen as a result.
The kiwi's fall came against a backdrop of mixed trading in the US dollar. The greenback recovered overnight but erased earlier gains as the covering of short positions eased.
The dollar rebounded on Monday to mark its largest one-day gain in a month against the euro, taking a cue from plunging commodity prices including the biggest fall in gold prices in over six years.
But traders said few in the market believe the dollar's downward trend had reversed given expectations that the Fed is poised to stop tightening credit.
Dealers doubt Thursday's local budget will influence the currency. They are looking for a no surprises document.
The NZ dollar strengthened overnight against the Australian dollar, buying A81.57c this morning from A81.10c yesterday evening but eased back at the close to A81.52c.
The aussie finished on US76.32c against US77.03c yesterday. Meanwhile, the trade-weighted index finished on 61.52 against 61.46 yesterday.
rates:
5pm today 5pm Monday
NZ dlr US62.20c US62.47c
NZ dlr/Aust dlr A81.52c A81.10c
NZ dlr/euro 0.4850 0.4835
NZ dlr/yen 68.52 68.42
NZ dlr/stg 33.02 32.95
NZ TWI 61.52 61.46
Australian dollar US76.32c US77.03c
Euro/US dollar US1.2819 US1.2926
US dollar/yen 110.14 109.55
- NZPA
<i>Currency:</i> Bollard comments nudge Kiwi lower
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