By ELLEN READ
Despite breaking 42USc yesterday for the first time in a month, the New Zealand dollar is unlikely to make any further large gains in the current environment, say currency brokers.
The kiwi hit a high of 42.21USc yesterday boosted by early morning NZ dollar-specific buying, mergers and acquisition activity and a weaker United States dollar.
The local currency was also helped by a stronger euro and Australian dollar, both of which rose as poor US retail figures and increased concerns about the military attacks in Afghanistan, weighed on the greenback.
The Australian dollar also benefited from strong talk within the market that a bid may be made for Australian miner WMC, valuing the company at as much as $A10.5 billion.
The aussie was at 51.27USc from 50.10c on Friday.
Brokers said while there was potential for further kiwi gains over the week, the longer term outlook remained subdued.
WestpacTrust currency strategist Jonathan Bayley said market sentiment and trends were little changed. Risk aversion flows were continuing to ease but nervousness and illiquidity were persisting.
Friday's announcement that Edison has made a $1.1 billion takeover for Contact Energy suggested a significant amount of local currency would have to be bought, and although the market did not know the extent to which this had already been done, it would encourage long rather than short positions in the New Zealand dollar, he said.
While the kiwi's rise occurred alongside the release of third quarter CPI figures - which came in on market expectations at 0.6 per cent for the quarter and an annual 2.4 per cent - brokers said this was largely ignored by currency traders.
<i>Currency:</i> Upside seen limited for kiwi dollar
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