A decision overnight to keep United States interest rates steady raised the hope of a US recovery and undermined the kiwi against the almighty dollar.
The US Federal Reserve opted early this morning, New Zealand time, to keep interest rates at 45-year lows of 1.00 per cent, but again warned about the risks of falling prices and said rates could stay low for "a considerable period".
Murray Hindley, ANZ chief foreign exchange dealer, said the kiwi fell from its highs of US58.82c early this morning to a low of US58.45c today.
"We may see a bit more US dollar strength tonight and a chance that kiwi could draw back to US58.20c as a result.
"It's a little bit of strength off the back of (the Fed decision), but certainly in the past US dollar strength has petered out rather quickly. There's still some interest in chasing yield and we should still see the kiwi supported on the back of that, albeit still within the range.
"Support's still in the low US58c and resistance in the US59c area," Mr Hindley said.
New Zealand's central bank is now widely expected to keep interest rates unchanged at 5.00 per cent when it meets on September 4, retaining the higher rates that investors have sought.
By 5pm the kiwi traded at US58.50c, down from US58.85c late yesterday, and the aussie was at US65.49c (US65.85c).
In Tokyo the US dollar extended gains after the Fed's decision raised hopes of a US economic recovery by signalling it would keep interest rates low for some time to come.
In Wellington by 5pm the euro eased to US$1.1263 from last night's close of US$1.1359c, while the US dollar was firmer at 119.03 yen (118.70 yen last night).
On the crosses at 5pm, the kiwi was buying A89.32c (A89.38c last night), 69.64 yen (69.85), 36.56 pence (36.64), 0.8018 Swiss francs (0.7991), and 0.5194 euros (0.5182).
The Australian dollar rose against the kiwi to buy $1.1198 ($1.1183).
The monetary conditions index was at plus 285 (301), the trade-weighted index was at 62.75 (62.94) and 90-day bank bill yields were at 5.13 per cent (5.14).
The February 2005 yields were at 5.26 per cent (5.29), the November 2006s were steady at 5.50 per cent, and the November 2011s were at 5.92 per cent (5.89).
- NZPA
<i>Currency:</i> Kiwi weakens against US dollar
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