The New Zealand dollar remained pegged in a narrow five-point range today, as investors tuned their radars to Japan's economic woes.
At 5pm the kiwi was at US42.72c, well up on yesterday's US42.58c close, but just one point better than its US42.71c opening level.
The Australian dollar improved to US51.97c (US51.84c at yesterday's close) on light turnover ahead of the Australia Day holiday on Monday.
"Volumes have been very light with not a lot of interest in the market," Deutsche Bank dealer Tim Robinson said.
"You've got Australia Day and Auckland Anniversary on Monday and a lot of people are in long weekend mode."
Investors were beginning to weigh up the effect Japan's recession could have on the Australasian growth currencies.
"Japan looks like it is going to be the topic of 2002.
"It is basically a Japan risk story. People are saying 'is Japan going to blow up?'," Mr Robinson said.
Those fears were delivering a double-whammy to the Japanese forex market of a weakening yen and a bond sell-off.
"My thoughts are that people are getting out of Japan and I don't think it's a positive for Asia if that is the case.
"If they are saying they are selling bonds because they think the weaker yen is going to be good for Japan, that is going to be positive for the aussie and kiwi (but) I don't think that's the case," he said.
The US dollar was buying 134.91 yen at the local market's nominal 5pm close, from 134.57 yen yesterday.
The kiwi followed suit, rallying to 57.61 yen -- a 2-1/2 year high and a 15 per cent improvement on lows around 48.00 yen struck following the September 11 terrorist attacks.
Dealers expected the kiwi to trade between US42.55c and US42.80c overnight.
On the other crosses at 5pm the kiwi was at A82.20c (A82.14c at yesterday's close), 0.4871 euros (0.4853), 29.96 pence (29.88), and 0.7154 Swiss francs (0.7121).
The Trade Weighted Index was at 52.01 (51.85), 90-day bank bills were at 4.88 per cent (4.87) and the monetary conditions index was at minus 678 (minus 694).
On the debt market, the March 2002 bonds were flat at 4.75 per cent, the April 2004s were at 5.84 per cent (5.86), the November 2006s were at 6.34 per cent (6.37), and the November 2011s were at 6.61 per cent (6.63).
- NZPA
<i>Currency:</i> Kiwi trades tightly ahead of Auckland/Aust holidays
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