The rising New Zealand dollar took advantage of a weaker US dollar yesterday, and looks poised to enter a new range.
By 5pm the kiwi traded at US46.43c, up on Monday's close of US46.23c, and the aussie rose to US54.05c, up from US53.85c Monday night.
ANZ Investment Bank chief foreign exchange dealer Murray Hindley said the kiwi traded in a range of US46.32/55c during the day. He picked it to trade between US46.30/70c overnight.
"There's obviously a bit of position adjustment ahead of the Federal Open Market Committee decision," Mr Hindley said.
The US Fed will announce early today, its decision on interest rates, just hours ahead of the Reserve Bank of New Zealand's announcement on the Official Cash Rate.
"The market is a bit out on (the US decision), I think there's still talk that they may move on rates but obviously people will have to wait and see" he said.
The market has priced in a no-change from the Reserve Bank, which would hold the benchmark interest rate at 5.75 per cent.
Bank of New Zealand currency strategist Stu Ritson said in a daily commentary that the kiwi appeared to have broken a three-week down trend.
"We would summarise the fundamental situation as still negative for the New Zealand dollar, but the technical outlook has turned more positive," Mr Ritson said.
"If the New Zealand dollar can push through (US46.90c), then we have the start of a new trend. If not, this level will likely prove the top of the range until the fundamental profile improves."
In offshore trade, the greenback was on the defensive yesterday after briefly hitting a one-week low against the yen.
Speculation that the Fed would cut the Federal Fund rate, already at a four-decade low of 1.75 per cent, grew rapidly last week after US investment bank Morgan Stanley predicted such an outcome.
But speculation has cooled down since US media reported that lower rates were not a sure bet. Dealers said the US dollar's destiny would ultimately hang on how US stock markets respond to any move by the Fed.
On the crosses at 5pm, the kiwi was buying A85.91c (A85.84c at Monday night's close, 55.20 yen (54.48), 30.30 pence (30.24), 0.6937 Swiss francs (0.6926), and 0.4744 euro (0.4748).
The aussie was trading at $NZ1.1639 ($NZ1.1652).
On the money market, 90-day bills were at 5.90 per cent (5.89), the trade-weighted index rose to 53.22 (53.20) and the monetary conditions index tightened slightly to minus 461 (minus 464).
On the debt market, the April 2004 bonds were at 5.69 per cent (5.61), the November 2006 bonds were at 6.08 per cent (6.04), and the November 2011 bonds were at 6.30 per cent (6.29).
- NZPA
<i>Currency:</i> Kiwi capitalises on US dollar weakness
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