The New Zealand dollar consolidated in a quiet session today, as the market appeared to have digested last week's surprise interest rate cut.
"That said, it's put on quite a good recovery off its US55.02c lows in the aftermath of the (Reserve Bank's) easing," one local strategist said.
The kiwi was punished after the Reserve Bank cut the Official Cash Rate by 25 points to 5.50 per cent to fend off the economic effects of drought, severe acute respiraroty syndrome (Sars) and a weak global outlook.
"Also we had evidence of Uridashi (yen bonds denominated in New Zealand dollars) issuance despite the easing at the end of last week," the strategist said.
"That just underscores our view that from a relative perspective New Zealand's rate differential is still quite substantial, so that puts the kiwi in good stead."
The kiwi was expected to trade within a US55.10/80c range overnight.
Westpac currency strategist Johnathan Bayley said that while at least one further Reserve Bank rate cut was on the cards this year, further cuts were likely in Europe and the US which would preserve New Zealand's relatively high interest rates.
At 5pm the kiwi was trading at US55.45c, not far from its close on Thursday ahead of the Anzac Day holiday of US55.48c.
ANZ head of foreign exchange John Body said the kiwi was saved from the full impact of the rate cut by the US dollar's ongoing weakness during the weekend, on some very poor US growth and employment data.
In Asia today the euro held strong near a six-week high on the dollar and four-year peak against the yen in the wake of the weak US growth results, and a slump in Japanese shares.
In Wellington at 5pm the US dollar was buying 120.18 yen, compared with 119.95 yen on Thursday, while the euro was at $US1.1044 ($US1.0989).
The aussie was at US61.74c, down from Thursday's close of US61.93c.
On the crosses, the kiwi was at A89.82c (A89.57c on Thursday), 66.65 yen (66.67), 34.77 pence (34.99), 0.7542 Swiss francs (0.7620), and 0.5020 euro (0.5058).
On the money market, the monetary conditions index was at plus 138 (plus 153), the trade-weighted index was at 60.44 (60.63), and 90-day bank bill yields were at 5.53 per cent (5.54).
The April 2004 yields were at 5.16 per cent (5.25), the November 2006s were at 5.34 per cent (5.44), and the November 2011s were at 5.75 per cent (5.85).
- NZPA
<i>Currency:</i> Kiwi consolidates above last week's lows
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