KEY POINTS:
The New Zealand dollar held yesterday's gains in a lacklustre forex market trading session today.
The kiwi had a choppy session overnight but recovered a half cent loss and held that through the day session. It ended at US69.55c at 5pm, compared to US69.34c at the same time yesterday.
Against the yen, the kiwi eased to 81.73 yen from 81.98 yen yesterday, while against the aussie it eased to A88.53c from A88.77c. The trade weighted index ended little changed at 68.56 from 68.59.
Stronger than expected retail sales for January published today will do nothing to dissuade Reserve Bank Governor Alan Bollard from thinking another rate hike is necessary.
Sales rose 0.5 per cent on a seasonally adjusted basis against economists' average forecast of a 0.2 per cent rise. Excluding cars, sales were up 1.0 per cent compared with static sales in December.
BNZ economist Stephen Toplis said the data fitted the BNZ's view that all the pressure on interest rates was up "but it would be a tad stretched to suggest they will have (Reserve Bank governor) Alan Bollard leaping for the trigger".
ANZ bank said yield demand had continued to support the NZ dollar and ensure dips remained brief and limited.
Concerns about the US subprime mortgage market had capped gains in equity markets and seen some unwinding overnight of carry trades - in which investors borrow cheaply in currencies with low interest rates such as the yen and invest elsewhere, such as the NZ dollar.
"While the NZD was sold down on the back of the brief carry trade unwind, it was quickly bid back up on the back of yield demand," ANZ said.
The US dollar was steady against the yen after slipping back towards a three-month low in the previous session as cautious investors trimmed some exposure to high-yielding currencies ahead of US retail sales figures.
Concerns that a rising number of defaults in the US mortgage sector could hurt the broader economy spurred selling of the dollar against the yen, erasing some gains after last week's upbeat US jobs data.
Currency strategist at Shinko Securities, Kengo Suzuki, said recent moves related to risk aversion that had affected currencies like the kiwi were not yet over.
"The dollar's upside looks limited for a while."
The yen had surged in late February and earlier this month as a sharp sell-off in global equity markets prompted investors to slash their risky carry trades.
But the Japanese currency quickly gave back those gains as stock markets rebounded, easing worries about a prolonged bout of investors avoiding riskier assets.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US69.55c US66.34c
NZ dlr/Aust dlr A88.53c A88.77c
NZ dlr/euro 0.5273 0.5288
NZ dlr/yen 81.73 81.98
NZ dlr/stg 35.99 35.85p
NZ TWI 68.56 68.59
Australian dollar US78.57 US78.10c
Euro/US dollar 1.3188 1.3112
US dollar/yen 117.48 118.22
- NZPA