The New Zealand dollar firmed against the greenback today after the delivery of a hawkishly-perceived Monetary Policy Statement.
However, the kiwi lost ground to the Australian dollar after much stronger than expected jobs data there raised the prospect of a rates rise.
The kiwi closed on US62.85c, about 20 pips above its opening, and against its US62.65c close yesterday.
Against the Australian currency, the New Zealand dollar dropped to A84.25c from A84.65c yesterday evening.
Bond yields rose after Reserve Bank governor Alan Bollard left interest rates unchanged while also increasing the bank's projection for inflation. He reiterated comments that there was no scope for a rate cut this year and hinted it may be the second half of next year before anything eventuates.
The higher interest rates has put a firmer floor under the kiwi, ANZ Investment bank chief dealer Murray Hindley said.
"The statement was taken as mildly hawkish," he said.
News that 56,000 jobs were created in Australian in May sparked fears the RBA would soon act to dampen down the economy.
The Australian dollar closed on US74.59c from US74.13c yesterday.
Dealers said the fear of rising interest rates across the Tasman based on a strengthening economy contrasted with New Zealand, where the fear of higher rates is based on rising inflation expectations coupled with a weak economy.
The New Zealand dollar trade-weighted index closed on 62.85 against yesterday's 62.72.
The US dollar hit a one-month high against the yen after another round of comments from a top Federal Reserve official cemented expectations that US interest rates will rise again later this month.
Atlanta Fed president Jack Guynn said on Wednesday that the central bank would not let its guard down when it comes to containing price pressures, echoing Fed chairman Ben Bernanke's remarks earlier in the week that vigilance was needed to keep inflation under control.
"The dollar is supported on US rate hike hopes," said Hideaki Inoue, forex manager at Mitsubishi UFJ Trust and Banking. "But with a June hike now nearly priced in, some people doubt if the dollar can rise further."
The following are Reuters currency rates:
5pm today 5pm Wednesday
NZ dlr/US dlr US62.85c US62.65c
NZ dlr/Aust dlr A84.25c A84.65c
NZ dlr/euro 0.4917 0.4891
NZ dlr/yen 71.39 71.00
NZ dlr/stg 0.3385 0.3369
NZ TWI 62.85 62.72
Australian dollar US74.59c US74.13c
Euro/US dollar US1.2782 US1.2828
US dollar/yen 113.58 113.10
- NZPA
<i>Currency:</i> NZ dollar firms versus greenback but loses against aussie
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