KEY POINTS:
The New Zealand dollar was confined to trading within a narrow range today, in a market reduced by the Auckland anniversary holiday.
By 5pm, the New Zealand dollar was trading at US69.56c, little changed from its close on Friday of US69.69c. It slipped below US70c at the end
of last week as the US dollar strengthened.
Against the Australian dollar, the kiwi was at A89.94c from Friday's A90.01c.
The long-term outlook for the NZ dollar was for a decline based on economic fundamentals like lower growth and acute deficits in external accounts, ASB Business said in its weekly commentary.
But in the short term, high interest rates would continue to support the currency.
A majority of analysts expected the Reserve Bank of New Zealand to raise interest rates by 25 basis points to 7.5 per cent on March 8.
But the Bank of New Zealand warned the likelihood of at least one further interest rate rise was not a guarantee the NZ dollar would climb to unseen heights.
Interest rates were a barometer of the economy, not a direct driver of the New Zealand dollar, which plunged in early 2006 when the markets perceived a cooling economy, the BNZ said.
"So, in signalling its clear intention to lean against the latest resurrection in domestic demand, the (Reserve) Bank now stands a good chance of convincing FX markets that the NZ dollar will no longer be a one-way bet," the bank said.
Nearer term, there is a smattering of data this week, including building consents tomorrow, Crown accounts and merchandise trade on Wednesday, and external migration on Friday.
The US dollar held near a four-year high against the yen, supported by solid US economic data that helped convince more investors that an interest rate cut by the Federal Reserve may not be necessary this year.
Trading was quiet in Tokyo as investors awaited a swarm of US economic data this week, in addition to a Fed rate-setting meeting ending on Wednesday, when the central bank is widely expected to keep rates unchanged at 5.25 per cent.
Rates:
5pm today 5pm Friday
NZ dlr/US dlr US69.56c US69.69c
NZ dlr/Aust dlr A89.94c A90.01c
NZ dlr/euro 0.5388 0.5393
NZ dlr/yen 84.69 84.70
NZ dlr/stg 35.51p 35.47p
NZ TWI 69.50 69.56
Australian dollar US77.37c US77.43c
Euro/US dollar 1.2907 1.2925
US dollar/yen 121.76 121.53
- NZPA