Currency: Kiwi takes off as Greenback sinks

The New Zealand dollar yesterday continued to build on gains made overnight as the greenback softened ahead of expected poor data this week.

At 5pm the kiwi was at US41.62c, from US41.11c on Monday, while the aussie rose to US50.77c from US50.12c yesterday.

The euro rose overnight against the US dollar to US90.55c, holding on to its more than one cent gain from Monday's US89.35c.

One local dealer said the aussie and New Zealand dollars had found a bit of favour.

"They've stayed pretty well underpinned. Certainly there's been a quick turnaround from Monday afternoon to mid-afternoon today on sentiment, that's for sure," the dealer said.

"The range today was US41.35/66c ... and it looks like it's going to be stuck in the US41.30/80c range (overnight), with probably a test seen to the top side straight up.

"There's been reasonable sized volume, a good mix (of local and offshore)."

Foreshadowing expectations of a US recession, the greenback is under pressure as it faces a barrage of data on the state of the US economy this week.

Among the data due are figures on unemployment, manufacturing, consumer confidence and third-quarter growth.

Worsening economic conditions in Japan underpinned the US dollar against the yen, but a mixture of factors such as worries about Argentina's debts and the strikes against Afghanistan hurt sentiment towards the dollar, US dealers said.

Meanwhile, the euro also took heart overnight from comments by Bundesbank president Ernst Welteke that rate cuts from the European Central Bank could come if inflation prospects improved further.

On the crosses at 5pm, the kiwi was trading at A81.97c (A82.00c at Monday's close), 0.4595 euros (0.4600), 50.73 yen (50.37), 28.58 pence (28.58), 0.8988 marks (0.8998), and 0.6771 Swiss francs (0.6786).

The Australian dollar was buying $NZ1.2199, against yesterday's $NZ1.2195 close.

The 90-day bill yields were at 4.96 percent (4.99), the trade-weighted index was at 49.48 (49.22) and the monetary conditions index was at minus 919 (minus 942).

Bank of New Zealand head of market economics Stephen Toplis said the domestic money market was now fully pricing in a 50 basis point cut in the official cash rate at the Reserve Bank's next review on November 14. The rate is currently at 5.25 per cent.

The 90-day-bills - which tend to move in tandem with the RB's cash rate - have rallied 9 points since Friday's 5.05 per cent close.

This is the first time the 90-day-bills have traded at these levels since September 1999.

Among the bonds, the March 2002s were at 4.83 per cent (4.88), the April 2004s were at 5.07 per cent (5.11), the November 2006s were at 5.64 per cent (5.69) and the November 2011s were at 6.22 per cent (6.28).

- NZPA