The New Zealand dollar remained fairly static today as the deadline to a US-led war in Iraq ticked ever closer.
Dealers remarked on the "groundhog day"-like similarity of ranges which the kiwi, aussie and euro all traded in compared to yesterday.
Volumes were relatively strong in the kiwi, but after trading in an average 26-point range, it closed near its session lows at US54.83c, near yesterday's close of US54.88c.
The Australian dollar was buying US59.30c (US59.25c) at 5pm.
Today, the US said its troops would roll into Iraq regardless of whether Iraqi president Saddam Hussein complied with its demand to leave the country, making war even more imminent.
The US dollar has gained four per cent against the euro in the last week, but in Asian trading today it steadied ahead of the actual attack.
Views are also beginning to diversify over how long fighting will last. Traders expect the US dollar to strengthen if it ends quickly, but in the long run, some are still bearish.
"Even if a war ends quickly, I think the dollar will eventually be sold because US economic fundamentals are a bit shaky," Nomura Trust and Banking foreign exchange manager Shogo Nagaya said.
But others are concerned that they will be caught short of US dollars if the war is quick. The influential euro , which has been heavily bought up in recent weeks , was trading at $US1.0633 ($US1.0640 yesterday and $US1.0813 at Monday's close).
"Basically, people are taking a bit of risk-premium out of the market and saying, well, we've still made money at these levels, let's take some of it because if it all turns pear-shaped from here, it could turn a bit ugly," said a local broker.
He said the risk for the kiwi tonight was still skewed to the downside, and picked it to trade between US54.40c/US55c.
On the 5pm crosses, the kiwi was having a mixed day against its main trading partners, buying A92.47c (A92.59c), 0.5156 euro (0.5157), 0.7586 Swiss francs (0.7570), 65.09 yen (65.04), and 35.02 pence (35.01).
The Australian dollar rose slightly to $NZ1.0809 ($NZ1.0800).
On the money market, Reserve Bank Governor Alan Bollard appeared to trim early hopes of an interest rate cut, saying the conditions for cutting interest rates had not yet been met, although the domestic economy was showing signs of weakening.
US treasuries slumped after the Federal Reserve left benchmark interest rates unchanged and failed to deliver clear guidance on its next policy move ahead of the Iraqi situation.
On the money market, 90-day bills were at 5.87 per cent (5.85), the monetary conditions index was flat at plus 190, and the trade-weighted index was at 60.67 (60.69).
The April 2004s were at 5.57 per cent (5.50), the November 2006s were at 5.66 per cent (5.58) and the November 2011s were at 6.04 per cent (5.95).
- NZPA
<i>Currency:</i> Kiwi, Aussie hold fast while Iraqi situation firms
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