Currency: NZ dollar shoots back above US56C

The New Zealand dollar scaled US56c again today but it was mainly a function of US dollar weakness, dealers said.

Against most other currencies the kiwi lost ground.

"Broad US dollar weakness overnight has meant that the New Zealand dollar versus the US dollar, while a laggard, has moved to the top of our expected weekly range," Westpac currency strategist Johnathan Bayley said.

The US dollar was destabilised by a resurgence in war expectations, Mr Bayley said, with British press reporting the United States will commence military action in ten days, in addition to talk that Russia and China now plan to support America's security council resolution.

By 5pm the kiwi was at US56.20c - well up on last night's US55.77c close. Its Australian counterpart was at US61.46c (US60.68c).

On the crosses, however, the kiwi eased against all its major trading partners as investors predicted the Reserve Bank of New Zealand will adopt an easing bias at Thursday's official cash rate review - eliminating some of New Zealand's interest rate differential advantage.

At 5pm the kiwi was buying A91.52c (A91.92c late yesterday), 51.56 euro (51.75) and 75.19 Swiss francs (75.66). The local unit touched a two-month low of A91c during the session.

It gained a little ground against the yen and sterling, rising to 66.13 yen (65.94) and 35.56 sterling (35.44).

On the 18th anniversary of the kiwi's float, the Trade-Weighted Index, measuring the kiwi against the currencies of New Zealand's five main trading partners, was almost at an indentical level to its float in 1985 - 61.35 versus 61.2 at the float.

Against the US dollar the kiwi floated at US44.0c. Its most dramatic rise was against the aussie, however, where it has risen 46 per cent compared with its float level of A62.4c.

In Asian trading today the US dollar clung near multi-year lows against the euro, but its fall against the yen was blocked by apparent Japanese intervention.

In Wellington, the euro rose to $US1.0910 from its $US1.0777 close here yesterday. The US dollar was buying 117.58 yen (118.23).

On the money market 90-day bills were at 5.73 per cent (5.76), and the monetary conditions index was at plus 233 (223).

On the bond market, the April 2004 government bonds were at 5.32 per cent (5.35), the November 2006s were at 5.27 per cent (5.32), and the November 2011s were at 5.65 per cent (5.70).

- NZPA