NZ dollar holds near week-low on OCR

Photo / Dean Purcell

The New Zealand dollar held near its lowest in a week after the Reserve Bank Governor Alan Bollard kept the official cash rate at 3 per cent amid weak consumer spending and a soft housing market.

The kiwi rose to 74.46 US cents after Bollard's statement from 74.39 cents immediately before. The currency was at 74.54 cents late yesterday.

Bollard said it was appropriate to keep interest rates at what he's previously called a "very stimulatory" level, but tighter monetary policy will probably be "required at some stage

Overnight the New Zealand dollar continued to fall against the US dollar as investors pared back their expectations on the scope of the Federal Reserve's second round of asset purchases next week.

The dollar index, a measure of the greenback against a basket of currencies, rose to 78.14 from 77.95 yesterday after an article in the influential Wall Street Journal speculated that the second round of quantitative easing may be smaller than initially expected due to an improvement in the US economy.

"Essentially there has been a pause in the bashing of the US currency," said Imre Speizer, market strategist for Westpac Bank. "US data has been decent of late and the Fed has said it will be watch data right up to the meeting to measuring impact on QE."

The kiwi fell to 66.41 on the trade-weighted index of major trading partners' currencies from 66.56. It fell against to 76.54 Australian cents from 76.64, and fell to 53.95 Euro cents from 54 cents yesterday. It increased to 47.11 pence from 47.09 pence, and fell to 60.65 yen from 60.91.

Speizer said he expected the dollar to trade in the 74 cents region, a key base level.

"If that level should give way, we're expecting the kiwi to fall several cents lower," Speizer said.