The New Zealand dollar was confined to a narrow range today, stalling just below 70 US cents ahead of the Reserve Bank's rate review on Thursday.
Overnight the kiwi notched up a three-week high against the US dollar and a year-high against the yen. But by 5pm, thekiwi was at US69.89c, up on yesterday afternoon's US69.54c but flat on its level this morning.
Against the Aussie, the kiwi was at A88.63c from A88.07c yesterday.
Bank of New Zealand chief currency dealer Mike Symonds said the kiwi was rangebound ahead of the Reserve Bank's decision.
"That continues to be the main focus, as one would expect, with the market increasingly uncertain as to whether the central bank will or will not raise interest rates.
"From our perspective, the argument supported by the data is quite compelling in terms of evidence the Reserve Bank should raise rates. But we certainly concede that the evidence past history would argue that the central bank governor decides to leave rates unchanged," Mr Symonds said.
If rates are left unchanged at 7.25 per cent, the Reserve Bank was highly likely to have to raise rates over the next few months, he said.
The prospect of continued high yields compared with other countries was boosting the NZ dollar, particularly as the outlook for the US dollar was unclear.
The kiwi's strength against the yen was symptomatic of ongoing strong issuance of uridashi, foreign-denominated bonds sold to Japanese investors, Mr Symonds said.
The yen slumped to its lowest level against sterling in more than eight years, and remains near decade lows against the Australian dollar, as investors continued to shun the low-yielding currency after the Bank of Japan kept rates on hold last week.
