The New Zealand dollar took a roller coaster ride today as rate calls by the US Federal Reserve Bank and New Zealand's Reserve Bank pulled it in contrary directions.
By 5pm in Wellington, the kiwi was at US67.59c from US67.82c at 5pm last night, having traded in a US67.98c to US67.18c range.
"It's been a very interesting day", ANZ Investment Bank senior dealer Brad Martin said.
While the Fed did not move rates this morning, it surprised the market by indicating a hike was not as far away as was expected.
"So that was positive for the US dollar because that narrows the yield gap with the rest of the world's interest rates", Mr Martin said.
The ensuing buy-up of US dollars saw "some big savage moves", with the kiwi diving to its lows for the day.
"And then the RBNZ came out and raised interest rates which was again unexpected".
Reserve Bank Governor Alan Bollard lifted the official cash rate by a quarter of a percentage point to 5.25 per cent in a bid to check the booming domestic economy, particularly the housing market.
Mr Martin said the move saw the kiwi go straight back up close to US68c. By mid-afternoon though it stabilised somewhat to trade around the US67.50c mark.
' 'I guess the direction's a little bit murky from here... ', he said.
"Initially I think London may buy (US) dollars."
He said support for the kiwi at the moment was at US67.20c, with resistance at US68c,
In the next few days Mr Martin expected to see further volatile moves leading up to the G7 meeting next week.
Meanwhile, at 5pm in Wellington, the Australian dollar was at US77.18c (US77.82c at 5pm yesterday), while the euro was at US$1.2472 (US$1.2620).
The greenback was buying 106.10 yen (105.64).
On the crosses the kiwi was buying A87.58c (A87.10c), 0.5421 euro (0.5370), 71.70 yen (71.72), 37.16 British pence (37.10), and 0.8482 Swiss francs (0.8418).
On a trade weighted basis, the New Zealand dollar was at 66.85 (66.70).
The monetary conditions index was at plus 646 (611), and 90-day bank bills were at 5.58 per cent (5.35).
February 2006 bond yields were at 5.70 per cent (5.52), July 2009 bonds were at 5.95 per cent (5.80), and April 2013 bonds were at 6.07 per cent (5.95).
- NZPA
<i>Currency:</i> Rate calls take Kiwi on roller coaster ride
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