Currency: Holiday, US dollar distract investors from Kiwi

The New Zealand dollar was little moved on Friday as many investors remained on holiday and war prospects hogged investor attention offshore.

Trading had been "very quiet," said a broker, and the Australian dollar had provided little impetus.

After trading in a tight eight point range, the kiwi dollar closed at US54.88c, compared with its US55.16c close on Wednesday before the Waitangi Day holiday.

The Aussie dollar was also st eadied after opening stronger on the back of a drifting US dollar . It closed here at US59.18c (US58.92c at its Australian close yesterday).

Overnight sentiment towards the greenback soured as new US intelligence failed to convince the United Nations of the need for military action against Iraq, stoking fears of unilateral action by the US.

Crosses with the euro and yen travelled in well-worn ranges with the euro closing at 1.0825 and the US dollar buying 119.70 yen.

BNZ chief dealer Mike Symonds said the kiwi was in limbo until it became clearer which direction the greenback was heading. That could come when UN chief weapons inspector Hans Blix makes his report on February 14.

Investors were momentarily distracted by a surprise interest rate cut by the Bank of England and by the European Central Bank's decision to keep rates on hold.

Britain's 25 basis point-rate cut to 3.75 per cent, a 48-year low, made the kiwi's interest rate differentials more attractive, although the reasons for it -- the prospect of lower world demand -- implied trouble ahead, he said.

For now, however, the kiwi was underpinned by British eurokiwi bond issues, demand out of Asia and a firm Australian dollar.

Brokers said the kiwi would trade between US54.85/95c, or possibly up to US55.10c if there was reaction to US non-farm payroll data tonight.

On the crosses, the kiwi was buying A92.70c (A93.92c at Wednesday's close), 0.5070 euro (0.5061), 65.69 yen (65.91 yen), 33.53 pence (33.37) and 0.7441 Swiss francs (0.7405).

The Australian dollar was buying $1.0783 ($1.0761).

New Zealand's trade-weighted index was at 60.42 (60.54), 90-day bank bills were flat at 5.84 per cent and the monetary conditions index was at plus 166 (174).

In the bond market, this week's rally continued with yields dropping further. The April 2004 government bonds fell to 5.45 per cent (5.49 per cent at Wednesday's close), the November 2006s fell to 5.52 per cent (5.58), the November 2011s fell to 5.83 per cent (5.86), and the April 2013s fell to 5.85 per cent (5.88).

- NZPA