The New Zealand dollar traded in a fairly narrow range today in a market reduced by the Auckland Anniversary Day holiday but tensions in Egypt remain a focus of investors.
The NZ dollar was worth US77.13c at 5pm today, little changed from US77.16c at 8am, and down from US77.27c at5pm on Friday. It briefly topped US77.90c against the greenback, its highest level in a month, during the weekend before slipping against a US currency which gained as tension in Egypt raised fears about stability in the wider Middle East and North Africa.
There are diverging views on New Zealand's economic prospects, with Treasury saying today the country likely avoided a technical recession last year.
While weaker than expected trade data for December released today caused Deutsche Bank to say the economy probably contracted in the fourth quarter of last year after contracting in the third quarter. The fourth quarter gross domestic product report will be released on March 24.
Deutsche bank cited weak retail sales, building consents and trade data for this view.
"Should further indicators point this way over coming weeks, we think that the Reserve Bank of New Zealand (RBNZ) will face some pressure to consider reversing last year's modest rate hikes when it next considers policy settings on March 10."
ANZ said last week's RBNZ statement was not as dovish as the market was expecting, catching the market off-guard somewhat and leading to a rise in the NZ dollar.
The political situation in Egypt has seen the US dollar's safe-haven status return to the fore, putting pressure on the NZ dollar. However, the NZ dollar had held up fairly well given the Middle East concerns, highlighting ongoing demand for the currency.
Westpac said the risk aversion relation to turmoil in Egypt should cap the NZ dollar at US78.00c this week.
The NZ dollar was at A77.71c at 5pm, down from A77.93c at 8am and A78.09c at 5pm on Friday.
The NZ dollar was at 0.5671 euro at 5pm from 0.5636 at the same time on Friday, and was at 63.28 yen from 63.87 yen on Friday.
The trade weighted index was at 68.91 at 5pm from 68.99 on Friday.
