KEY POINTS:
The New Zealand dollar spiked higher after the Reserve Bank decided to keep interest rates steady today but set the scene for a further rate rise.
The kiwi had drifted off ahead of the announcement at 9am, but by about 5pm was at US68.60c from US68.65c late yesterday.
Against the Aussie, it was at A87.09c from A87.20c.
ANZ Investment Bank chief foreign exchange dealer Murray Hindley said the kiwi had reacted to a hawkish Reserve Bank Governor Alan Bollard, who said medium-term inflation pressures persisted. He left the Official Cash Rate (OCR) steady at 7.25 per cent, but prompted NZ-dollar buying by saying any easing of the brakes was a long way off.
"It probably suggests that there's probably more upside bias in it again tonight. I wouldn't rule out another test above US69c," Mr Hindley said.
A large majority of economists were expecting the Reserve Bank to leave the OCR unchanged at 7.25 per cent.
The kiwi traded between US68.18c and US68.75c during the session, and if it broke above US68.80c overnight it would push on to US69.20c, Mr Hindley said.
The US dollar held onto its gains today, scored after a private-sector report showed solid US job growth in November, boosting chances of a positive payrolls report later in the week.
Investors mostly stuck to the sidelines before the European Central Bank's policy meeting later in the day, looking for signs from President Jean-Claude Trichet that rates may keep rising in 2007 following a widely expected increase to 3.5 per cent.
The dollar has clawed up from 20-month lows struck against the euro and a four-month trough against the yen as surprisingly strong US data on employment and service sector growth has offset other figures showing manufacturing activity contracting.
The following are Reuters currency rates:
5.10pm today 5pm Wednesday
NZ dlr/US dlr US68.60c US68.65c
NZ dlr/Aust dlr A87.09c A87.20c
NZ dlr/euro 0.5162 0.5156
NZ dlr/yen 78.93 78.90
NZ dlr/stg 34.88p 34.82p
NZ TWI 67.12 67.12
Australian dollar US78.79c US78.75c
Euro/US dollar 1.3289 1.3320
US dollar/yen 115.13 114.85
- NZPA