Currency: Rangebound Kiwi holds some ground against falling Aussie

Falling world equity markets pushed the kiwi to its lowest closing level in more than a fortnight.

By 5pm the kiwi had slid to US46.85c compared with US47.06c at Monday's close, while the aussie had eased further to US54.26c (US54.61c).

"I'd hate to think what the range was on the day but it wouldn't be much, so the kiwi's hanging in there pretty well compared with the aussie which is on its lows," one dealer said.

"The kiwi, while it's off, is making progress on the kiwi/aussie cross.

"The keys are still Japan and Iraq, and we've got the FOMC (Federal Open Market Committee) on Wednesday morning," he said.

The US Fed was not expected to change interest rates at today's meeting, retaining them at a 40-year low.

Equity markets, also reacting to uncertain prospects in the Middle East and economic growth concerns, have fallen to multi-year lows in some cases, causing fluctuations in the currency markets.

As investors fled equities on those growth concerns, New Zealand's Top-40 index of stocks fell for a fifth day to a seven week low; the Nasdaq Composite Index in the US dropped to a six-year low; Europe's Dow Jones Stoxx 50 Index slipped to its lowest in five years; and Britain's FTSE-100 was at six-year lows.

"Kiwi's stuck in a range of US46.65c and US47.10c ... there'll be more of the same, equities continue to struggle, and we wait to see what happens with Iraq," the dealer said.

BNZ currency strategist Stu Ritson said in a daily commentary that the kiwi could slump towards US46c if it breached current support levels.

"We continue to hold a mildly bearish New Zealand dollar bias, and prefer to sell rallies back towards the US47.25/30c level," he said.

In offshore markets, the yen regained ground in Asia today, recouping some of its hefty losses made while Japan was on holiday on Monday. However, traders said it looked set to fall again due to spreading pessimism about the Japanese economy.

In Wellington the US dollar was buying 123.48 yen, from 123.15 yen Monday night, while the euro had eased to US97.75c (US98.14c).

On the crosses at 5pm the kiwi was trading at A86.35c (A86.18c at Monday's close), 57.85 yen (57.95), 30.23 pence (30.29), 0.7016 Swiss francs (0.7015), and 0.4792 euro (0.4795).

The aussie was buying $NZ1.1581 ($NZ1.1604).

On the money market, 90-day bills were at 5.85 per cent (5.88 per cent), the trade-weighted index was at 54.06 (54.16) and the monetary conditions index had eased to minus 386 (minus 377).

The April 2004 bonds were at 5.55 per cent (5.56), the November 2006 bonds were at 5.80 per cent (5.82), and the November 2011 bonds were at 5.96 per cent (6.01).

- NZPA