The New Zealand dollar remained firm but static yesterday, ending a strong post-interest rate rally.
By 5pm the kiwi was at US45.88c from US45.71c at Wednesday's close. Its Australian counterpart was US54.82c (US54.71c).
Tim Robinson of Deutsche Bank said the kiwi opened on its highs after trading strongly with the Australian dollar overnight, but failed to push through a crucial US45.95c barrier.
"It's actually been a really quiet day, the low's been US45.80c the high's been 94, but basically it's been (trading in) a five point range."
Mr Robinson said investors were stopping to take stock after Wednesday's strong run which followed a 25 basis point rise in the official cash rate.
"We've moved a long way in a reasonably short time and it might be time for the market to give back a little ground. I think we're going to see a bit of a retracement from here."
Over the next week, Mr Robinson said the kiwi could be expected to backtrack to around US45.05c, a move which would "shake some of the nervous longs out of the market".
But basically he felt the kiwi had simply gotten "ahead of itself". Good inventory data out of the US overnight would add to the recovery of the US dollar, and he felt that would put pressure on the yen and euro in the short-term.
But in the long-term, the kiwi's outlook is still looking positive. Bank of New Zealand Stu Ritson said Wednesday's move by the Reserve Bank put New Zealand's short term rates 375 basis points above those in the US, making the kiwi an attractive proposition as a pure interest play.
Acting RB governor Rod Carr yesterday projected the OCR will peak at 6.5-6.75 per cent by mid-next year.
On the crosses at 5pm, the kiwi was at A83.70c (A83.59c at Wednesday's close), 0.5035 euro (0.5078), 58.59 yen (58.79), 31.46 pence (31.55) and 0.7331 Swiss francs (0.7394).
The aussie was buying $NZ1.1947 ($NZ1.1964).
The monetary conditions index was at minus 370 (minus 371) and 90-day bank bills were at 5.89 per cent (5.81 per cent). The trade-weighted index continued to trade around a two-year high of 54.22 from 54.29 at Wednesday's close.
On the debt market, the April 2004 bond yields were at 6.23 per cent (6.26 at yesterday's close), the November 2006s were at 6.78 per cent (6.80), and the November 2011s were at 6.90 per cent (6.94).
- NZPA
<i>Currency:</i> Kiwi pauses after interest-related rally
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