Currency: Kiwi perches above US60c

The New Zealand dollar continued trading above US60c today, although it retreated from fresh near-six year highs overnight.

By 5pm the kiwi was at US60.22c, up from last night's close of US59.71c, while the aussie was also higher at US69.95c (US69.31c).

Westpac currency strategist Johnathan Bayley said the kiwi hit a new intra-day high of US60.47c, last seen in December 1997.

"Kiwi has really gone no-where until the last 24 hours. The rally... started in the London and New York sessions last night.

"It's come off a bit, and liquidity is still quite good here. It's very much a southern move because euro/dollar and dollar/yen are effectively nowhere.

"The interest was initially in aussie and the kiwi caught up," Mr Bayley said. The Australian dollar has traded at six-year highs just above US70c in the same period.

Reasons for that interest may have included: good issuance of uridashi bonds; the sale of Mayne's hospital unit in Australia yesterday A$813 million ($953 million); talk of a free trade agreement between Australia and China; and speculation that the ANZ will announce the purchase of the National Bank possibly as early as Friday.

The market is also picking that, while the Reserve Bank will leave the Official Cash Rate at 5.00 per cent tomorrow, it take a hawkish tone in the accompanying commentary and warn about the growing risk of inflation.

Although the kiwi has broken through the key US60c barrier, it still did not look convincingly in charge at these levels.

While the kiwi would trade around current levels overnight, Mr Bayley picked the kiwi to retreat to the mid-US58c level in the next couple of weeks before trading higher again.

In Tokyo the greenback steadied against the yen and the euro as the market looked around for new factors after the communique adopted at the Asia-Pacific Economic Cooperation (Apec) forum made no reference to currency policies.

Operators had been waiting to see if US President George W Bush, keen on getting support from US manufacturers ahead of an election next year, would push Apec leaders to adopt a message criticising China and Japan for holding their currencies down.

By 5pm in Wellington the euro was at US$1.1673, up from US$1.1636 late yesterday, while the greenback was at 109.48 yen (109.83).

On the crosses the kiwi was buying A86.10c (A86.14c), 65.92 yen (65.56), 0.5160 euro (0.5132), 35.94 pence (35.73), and 0.8009 Swiss francs (0.7967).

The Australian dollar was at $1.1618 ($1.1609).

The monetary conditions index was at plus 249 (221), the trade-weighted index was at 62.20 (61.85), and 90-day bank bill yields were unchanged at 5.21 per cent.

The February 2005 government bond yields were at per cent 5.45 (5.47), the November 2006s were at 5.78 per cent (5.81), and the November 2011s were at 6.05 per cent (6.09).

- NZPA