The New Zealand dollar continued its rebound today, having tested US54c overnight.
A senior Wellington dealer said direction depended on whether the rebound of the US dollar was a temporary spike or a major correction up.
The kiwi closed at US54.42c compared with its overnight low of US54.04c and against US54.38c at yesterday's close, while its Australian counterpart closed at US58.48c from US58.68c yesterday.
"It's up off its bum and had a reasonable recovery from last night's lows," the dealer said.
Considering the rebound in the euro, the Australian dollar looked heavy while the kiwi felt robust, he said.
"There is potential to see more downside in both kiwi and aussie but the kiwi is holding up pretty well."
The Institute for Supply Management reported US manufacturing expanded for the third straight month in January, with the main manufacturing business conditions index coming in at 53.9, down from a revised 55.2 in December but ahead of forecasts of a rise to 53.7.
That data helped the US dollar firm early in the New York session, but those gains were quickly eroded as investors sold into the rally.
Dealers said it was hard to remain bullish about the greenback's prospects given the possibility of a war with Iraq.
The New Zealand dollar's ability to hold its head above US54c was seen as positive but local analysts said the corrective pullback - from highs above US55c in recent weeks - could have further to play out.
"Looking at the daily charts we see that the New Zealand dollar has been making a series of lower lows and lower highs which suggests that further short-term weakness may be forthcoming," Bank of New Zealand's Stu Ritson said.
Westpac currency strategist Johnathan Bayley agreed, suggesting the kiwi would likely range between US53.80c and US54.80c in the coming week.
"We continue to look for a sizeable bounce in the US dollar, noting a number of signs that profit-taking on short US dollar positions has already begun," he said.
The kiwi improved against most of its main trading partners and at 5pm was buying A93.10c (A92.46c at yesterday's close), 0.5055 euro (0.5045), 65.62 yen (65.11 yen), 33.13 pence (33.00) and 0.7411 Swiss francs (0.7392).
The Australian dollar was buying $NZ1.0747 ($NZ1.0815).
New Zealand's trade-weighted index was at 60.12 (59.91), 90-day bank bills were at 5.86 per cent (5.84) and the monetary conditions index was at plus 142 (125).
On the debt market, bonds rallied with the 11-year bond yields dropping well below 6.0 per cent. A US economic rebound may stoke domestic growth in New Zealand, damping demand for government debt, analysts said.
The April 2004 government bonds were at 5.51 per cent (5.52), the November 2006s at 5.60 per cent (5.64), the November 2011s at 5.92 per cent (5.98), and the April 2013s at 5.95 per cent (5.99).
The US economy is showing signs of "improvement," said Stephen Hong of BNZ Investment Management, but he predicted bond yields would "go up this week".
A sale today added to the decline in bonds as some investors sold existing debt to buy shorter-maturity securities.
- NZPA
<i>Currency:</i> Kiwi continues rebound
AdvertisementAdvertise with NZME.