International interest rate decisions were ignored by the New Zealand dollar yesterday as it continued to tread water above the US40c level.
The decision by the Reserve Bank to leave its key interest rate unchanged at 5.25 per cent was expected, in the wake of a surprise rate cut two weeks ago.
Just hours earlier the US Federal Reserve slashed its key rates by 50 basis points to 2.5 per cent, and the Reserve Bank of Australia made a 25 point cut later in the morning, both in line with expectations.
"Both the Fed and the RBNZ this morning have delivered exactly what the markets were expecting so it is not surprising there has been no real reaction," one local currency dealer said.
RBNZ governor Don Brash said in a statement that the outlook for the world economy and the likely impact on New Zealand's economy and inflation remained "highly uncertain".
"At this stage, it appears best to leave the OCR unchanged. We will have an opportunity for a fuller review of the outlook for economic activity and inflation, and the risks around that outlook, in our next Monetary Policy Statement, which will be released on November 14."
Economists expect the RBNZ to cut rates by 25 basis points at the November meeting.
Today the kiwi improved on light volumes and largely on the back of a stronger euro and aussie dollar. It traded sunk no lower than US40.43c and was still climbing when the market closed at US40.84c. Dealers expected the kiwi to trade in a range between US40.45c and US40.90c.
At 5pm the kiwi improved against most currencies, buying A82.02c (A82.07c at yesterday's close), 49.30 yen (48.82), 27.78 pence (27.43), 0.8669 marks (0.8648), 0.6601 Swiss francs (0.6559) and 0.4432 euros (0.4422).
On the aussie-kiwi cross, the Australian dollar made gains then fell slightly to close at $A1.2195 ($A1.285).
The trade-weighted index rose to 48.40 (48.14), while the 90-day bill yields stayed steady at 5.28 per cent. The monetary conditions index tightened to minus 999 (minus 1025).
Among the bonds, the March 2002s were at 5.10 per cent (5.11), the April 2004s were at 5.41 per cent (5.42), the November 2006s were at 5.95 per cent (5.96), and the November 2011s were at 6.37 per cent (6.38).
- NZPA
<i>Currency:</i> Kiwi ignores international interest rate cuts
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