The New Zealand dollar held its ground after the Reserve Bank left rates steady today, but softened later on the back of weak retail sales data.
By 5pm, the kiwi was at US70.98c from US70.65c late yesterday afternoon, having peaked near US71.60c early this morning as the USdollar fell to a record low against the euro.
RBNZ Governor Alan Bollard kept rates at 8.25 per cent following four successive hikes, but projected that rates will remain around current levels until 2010.
The kiwi was broadly flat around US71.20c/30c after the RBNZ statement.
"The tone of the statement was fairly close to what people expected," said Westpac currency strategist Michael Gordon.
"The upside and downside risks were both put more strongly than I'd expected, but I think the compromise between those two means they were pointing to an extended period of rates on hold."
However, the kiwi dropped below US71c, triggering more selling, after July's flat retail sales against economists' forecast of a 0.2 per cent rise.
"The momentum of the domestic economy in particular is showing clear signs of slowing down after endless rate hikes," Mr Gordon said.
The US dollar held above a 15-year low against a basket of currencies today as investors took profits on its slide and waited to see how deeply the Federal Reserve might cut interest rates next week.
The Fed is widely seen lowering rates by 25 or 50 basis points from 5.25 per cent at Tuesday's meeting, a move that would erode the dollar's yield appeal.
But traders said the US dollar was getting a slight lift in Asia as investors cashed in on its steady slide, even as the outlook remained negative.
Some market players in Japan were also taking profits in the euro and higher-yielding currencies before a long weekend, with domestic markets closed on Monday for a holiday.
