KEY POINTS:
The New Zealand dollar jumped to a four-month high against the Australian dollar today, as the focus returned to interest rates due to the Reserve Bank's hawkish stance.
The kiwi began the day positively, around US76.80c, after the Reserve Bank of Australia left interest rates on hold yesterday and issued a dovishly perceived commentary.
The kiwi then jumped through US77c, and to a four-month high of A88.86c, after Reserve Bank Governor Alan Bollard warned that interest rates were likely to stay high for longer than previously forecast.
He left the Official Cash Rate steady at 8.25 per cent, but the bank forecast it would breach its 1-3 per cent inflation target next year.
Westpac currency strategist Michael Gordon said today's announcement put monetary policy back on the market's agenda.
"That's really been the story of the day, that more hawkish tone, where I think the market has got to the point where it's treating monetary policy as a non-issue, it's revived things a bit."
The Reserve Bank was not actually out of step with other central banks in its assessment of risks from the global credit crisis, particularly the RBA which is taking a cautious view of the global economy.
"The RBNZ was already more cautious on the world in their September forecasts, and in a sense the world is still coming down to meet them, whereas the RBA was quite upbeat on the world in November, less so in December," Mr Gordon said.
By 5pm, the kiwi was at US77.08c from US76.05c late on Wednesday, and had risen almost A1c to A88.31c.
Trading overnight would continue to be dominated by global conditions, and in particular the US economic slowdown, ahead of US employment figures on Friday night and next week's US Federal Rate interest rate-setting meeting.
The US dollar pushed to a one-month high against a basket of currencies today, with European currencies kept in check as expectations mount for the Bank of England to start cutting interest rates today, by a quarter point to 5.50 per cent.
- NZPA
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US77.08c US76.05c
NZ dlr/Aust dlr A88.31c A87.35c
NZ dlr/euro 0.5276 0.5150
NZ dlr/yen 85.54 83.70
NZ dlr/stg 37.99p 36.98p
NZ TWI 71.58 70.29
Australian dollar US87.30c US87.05c
Euro/US dollar 1.4609 1.4764
US dollar/yen 110.99 110.07
- NZPA