The New Zealand dollar finished strongly in local trading after initially spiking about a quarter of a cent on news the Reserve Bank (RB) had cut the official cash rate (OCR).
The kiwi finished on US58.55c, well up on the US58c it was trading at before the RB confirmed it was cutting the OCR 25 basis points to 5 per cent.
Immediately after the 9am announcement, the kiwi jumped to US58.32c, having yesterday closed at US57.54c.
A BNZ forex dealer said the kiwi closed "pretty much" on its trading highs for the day and its movement after the OCR announcement was expected.
"So it was just a case of what we were doing before the announcement and that was pretty much buying kiwi," the dealer told NZPA today.
The RB said the OCR cut was needed to counter a slowing economy and that it could be further pruned if the export sector suffered more from currency gains.
The RB's view that the kiwi could further appreciate was in line with the generally held market view, the dealer said.
"When the market realised that the statement (from the RB) was relatively neutral, it was back to the whole story of US dollar weakness and kiwi has been well-bid for much of the day," BNZ currency strategist Sue Trinh said.
The euro was at US$1.1481 at 5pm in Wellington, from US$1.1365 at market's close last night.
The US dollar was buying 118.83 yen (119.02).
Against the aussie the kiwi closed at A88.39c (A88.25c).
On other crosses, the kiwi was buying 69.49 yen (68.51), 36.35 pence (36.04), 0.7880 Swiss francs (0.7824), and 0.5091 euro (0.5064).
The monetary conditions index was at plus 245 (193), the trade-weighted index was at 62.32 (61.67) and 90-day bank bill yields were at 5.08 per cent (5.06).
The February 2005 yields were at 4.93 per cent (4.99), the November 2006s were at 5.15 per cent (5.18), and the November 2011s were at 5.56 per cent (5.56).
- NZPA
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