KEY POINTS:
The New Zealand dollar held above US70c today in a sluggish market thinned by holidays in the United States and much of Asia.
The kiwi closed on US70.05c compared with US70.21c at 5pm yesterday.
Against the Australian dollar, it closed at A89.08c from A89.10c at 5pm yesterday. The trade weighted index eased to 69.21 from 69.34.
ANZ bank said the NZ dollar had surged yesterday on local demand, with the US market closed for Presidents Day and much of Asia closed for Chinese New Year celebrations.
Sellers were few and far between, and the kiwi's strength going into a possible interest rate hike in Japan this week had taken many by surprise.
Charles Levin, an independent currency traded and adviser to exporters told The Dominion the kiwi was on a pivot point on the charts and there was a good chance it could swing significantly higher -- to over US80c. There was also a risk it could drop suddenly to US60c, he said.
"We've either got to start going back down straight away or keep going up. If we go up, we're going to blow right through the old highs," he predicted.
ANZ said yield was the key, with the Reserve Bank set to lift New Zealand interest rates next month, and markets bringing forward expectations of a cut in the US.
In major currency trading, the US dollar edged up against the yen, pulling away from a five-week low as investors doubted whether a potential interest rate increase by the Bank of Japan would do much to help the beleaguered Japanese currency.
Market players are divided over whether the BOJ will lift rates to a decade-high of 0.5 percent from 0.25 percent at its two-day policy meeting ending on Wednesday after the central bank kept rates steady last month in a split decision.
Even if the BOJ lifts rates, investors increasingly believe the yen will still suffer with rates so much higher at 5.25 percent in the United States and 3.5 percent in the euro zone and the BOJ seen waiting a while before tightening policy further.
The US dollar was still feeling the sting from a string of weak economic data last week and comments from Federal Reserve Chairman Ben Bernanke that were seen as suggesting the Fed is more likely to cut rates next than raise them.
By contrast, the European Central Bank and Bank of England are both expected to raise rates further, enhancing the yield appeal of the euro and sterling.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US70.05c US70.21c
NZ dlr/Aust dlr A89.08c A89.10c
NZ dlr/euro 0.5318 0.5337
NZ dlr/yen 83.80 83.85
NZ dlr/stg 35.81p 35.93p
NZ TWI 69.21 69.34
Australian dollar US78.69c US78.82c
Euro/US dollar 1.3174 1.3155
US dollar/yen 119.61 119.42
- NZPA