The New Zealand dollar was reluctant to move from its US56c perch today ahead of tomorrow's decision on interest rates.
By 5pm the kiwi had improved slightly to US56.37c from its close last night at US56.20c. Its Australian counterpart was at US61.74c (US61.46c).
The Reserve Bank is expected to keep the official cash rate at 5.75 per cent, but analysts expect the bank to start cutting again around mid -year.
Australia's central bank today held interest rates steady at 4.75 per cent for the ninth month straight as global uncertainties and drought weighed against Australia's still robust farm economy.
Overnight the Bank of Canada raised its key interest rate for the fourth time in less than a year to 3.00 per cent and said it planned more increases.
The big differential between the interest rates of the so-called commodity currencies - the aussie, the Canadian, and the New Zealand dollar - and the United States (at 1.25 per cent) has seen them rally strongly in the past year.
The US dollar has also been on the back foot in recent weeks as fears of a possible war with Iraq escalate.
In Wellington at 5pm the US dollar slipped to 117.27 yen, from 117.58 yesterday, while the euro rallied to $US1.0942 ($US1.0910).
Bank of New Zealand currency strategist Stuart Ritson said the BNZ remained bullish about the kiwi long-term, but tempered its enthusiasm ahead of the Reserve Bank's monetary policy statement tomorrow.
"It is generally expected that the Reserve Bank will sit pat, but the reality is that even if the Reserve Bank were to signal lower interest rates in coming months, New Zealand interest rates would still be among the highest in the developed world," Mr Ritson said.
The kiwi continued to soften against its other main trading partners today. By 5pm it was buying A91.31c (A91.52c yesterday), 0.5135 euro (0.5156), 0.7493 Swiss francs (0.7519), 66.11 yen (66.13) and 0.3547 British pence (0.3556).
On the money market 90-day bills were steady at 5.73 per cent, the monetary conditions index was at plus 229 (plus 233), and the trade weighted index was at 61.30 (61.35).
On the bond market, the April 2004 government bonds were at 5.34 per cent (5.32), the November 2006s were at 5.28 per cent (5.27), and the November 2011s were at 5.63 per cent (5.65).
- NZPA
<i>Currency:</i> Kiwi perches above US56c ahead of rates decision
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