As nervous offshore markets assessed the air crash in New York, the New Zealand dollar settled into a day of consolidation ahead of tomorrow's interest rate decision.
Money markets are expecting a 25 to 50 basis point cut to the official cash rate from the Reserve Bank of New Zealand.
But today the kiwi dollar held onto most of the gains it made on the tail of the Australian election, trading at US42.24c and travelling within a tight range of US42.18-28c. It lost a little ground from yesterday's close of US42.43c.
The aussie rose to US52.03c from US51.77c last night.
This morning's crash unsettled the greenback as initial fears of further terrorism were reawakened. By the time the New Zealand market opened, most of that reaction had subsided, but peripheral currencies like New Zealand and Australia had struggled to rally, BNZ dealer Greg Ball said.
"It's just a reminder to anyone of the fragility of the US and basically everywhere offshore," he said.
He predicted the kiwi would trade within an overnight range of US42.10-40c.
Tomorrow, he said, all eyes would be on the Reserve Bank. "It depends how you see it -- the interest rate yield differential argument is that people would like to see higher rates to place their capital in New Zealand.
"But what we want to see is the Reserve Bank creating a stimulatory environment... By cutting rates, they will hopefully get things back on track and they'll also be replicating what other countries have done as well. We don't want to be seen to have a lot higher rates than other countries, because we think that would be negative to our economic growth."
On the 5pm crosses, the kiwi was trading at A81.20c (A81.45c at last night's close), 0.4736 euros (0.4719), 50.07 yen (50.78), 29.07 pence (28.94), 0.9262 marks (0.9235), and 0.6948 Swiss francs (0.6919). The Australian dollar was buying $NZ1.2316 from $NZ1.2279 yesterday.
The trade-weighted index was at 50.10 (49.98), 90-day bank bills were at 4.88 per cent (4.88), and the Monetary Conditions Index tightened to minus 865 (878).
On the debt market, the March 2002 bonds were steady at 4.78 per cent, the April 2004s were at 5.06 per cent (5.08), the November 2006s were at 5.57 per cent (5.60), and the November 2011s at 6.08 per cent (6.12).
- NZPA
<i>Currency:</i> Kiwi consolidates ahead of expected interest rate cut
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