The New Zealand dollar drifted lower yesterday as concerns over the state of the Japanese economy again captured world headlines.
At 5pm the kiwi was at US41.73c from US41.95c at Tuesday's close. Its Australian counterpart was at US50.92c (US51.18c).
"It's not much of a story today. There's been an 8-point range on the day," Deutsche Bank dealer Tim Robinson said.
Trade was sparse due to the Lunar New Year holidays in major Asian markets Singapore and Hong Kong.
The US dollar and Japanese yen dominated world currency markets after Moody's Investors Service said it was reviewing Japan's domestic debt rating for a possible downgrade.
Citing concerns about the impact of deflation on the economy, Moody's said the review could result in a confirmation of Japan's Aa3 government domestic yen rating or a cut by one or two notches.
"The two notches is the thing that really spooked the market," Mr Robinson said.
"The market was looking for a cut, but I think two notches is a fairly suprising comment. That's going to cap kiwi and aussie overnight and certainly put a bid on the dollar-yen."
Mr Robinson expected the kiwi to head lower in the offshore session, trading between US41.45c and US41.80c.
"This Moody's comment is reasonably negative and I think it's going to be a sell-Asia mentality that will come back to the fore."
Next week's Consumer Price Index was the nearest piece of local data with enough grunt to move the market, Mr Robinson said.
On the crosses at 5pm the kiwi was at A81.96c (A81.97c at yesterday's close), 55.45 yen (55.93), 29.14 pence (29.47), 0.7042 Swiss francs (0.7057), and 0.4769 euro (0.4781). The aussie traded flat at $NZ1.2201.
The trade weighted index was at 50.86 (51.10), the monetary conditions index was at minus 787 (minus 765), and 90-day bank bills were at 4.91 per cent (4.90).
On the debt market, March 2002 bonds were steady at 4.73 per cent, April 2004s were at 5.85 (5.81), November 2006s were at 6.39 per cent (6.35), and November 2011s were at 6.65 per cent (6.60).
- NZPA
<i>Currency:</i> NZ dollar drifts lower on Japan's woes
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