KEY POINTS:
The New Zealand dollar drifted off Friday night's highs but was supported by expectations of an interest rate hike across the Tasman tomorrow.
The kiwi drifted off a session peak of US79.55c to close at US79.14c, compared to US78.85c at Friday's close.
In Friday's offshore session, the kiwi jumped to US79.61c, unaffected by a rebound in the greenback on stronger than expected manufacturing data.
The ANZ Institutional Bank said in a market outlook that with sentiment towards stock markets stabilising, yield-related demand looked set to cement further "antipodean" support.
ANZ technical analyst Mark Elliott said the Aussie also enjoyed a boost from interest by a Chinese sovereign bank in mining company Fortsecue, creating heavy merger and acquisition demand for the currency today.
As a result, the kiwi-aussie cross softened, closing near its lows at A87.53c (A87.90c on Friday).
Mr Elliott said that the kiwi could benefit from an Australian rate hike tomorrow but as the market had largely priced that in, it could also be sold off.
If the market got what it was looking for, "there's a good chance the market will be chock full of long positions, looking for somebody to take it off their hands and if that doesn't happen, you could see it cave in on itself.
"I think the kiwi's probably toppish around the US79.50c-US80c area. Technically some of the momentum indicators are showing it to be very over-bought."
Data released today showed migration had at its smallest monthly gain for nearly seven years. The labour cost index is due out tomorrow and jobs data follows on Thursday for the fourth quarter.
Rates at 5pm today/5pm Friday:
NZ dlr/US dlr US79.14c US78.85
NZ dlr/Aust dlr A87.53c A87.90c
NZ dlr/euro 0.5344 0.5303
NZ dlr/yen 84.56 83.87
NZ dlr/stg 40.22p 39.61p
NZ TWI 72.48 72.15
Australian dollar US90.43c US89.66c
Euro/US dollar 1.4807 1.4871
US dollar/yen 106.85 106.33
- NZPA
