Bouncy night for NZ dollar

The New Zealand dollar bounced around in overnight trading ahead of the Reserve Bank's official cash rate (OCR) review this morning.

Reserve Bank Governor Alan Bollard kept the rate on hold.

Banks expect that the first hike in the official cash rate is not expected until midway through the year.

BNZ strategist Mike Jones said the Reserve Bank decision was likely to add a bit more weight on the NZ dollar.

The kiwi was affected by strong consumer price index numbers from Australia yesterday which pushed its annual inflation rate to 2.1 per cent. The NZ dollar recovered from year lows to be at A78.76c at 8am from A78.43c at 5pm yesterday.

Against the US dollar it was US70.52c at 8am from US70.75c at 5pm yesterday.

With an interest rate decision due in the United States and a State of the Union address from President Barack Obama currency markets played a waiting game overnight.

Fears that China is looking to tighten monetary conditions and thus hampering growth also affected the markets.

The sterling made gains after comments that the inflation target may be under pressure from rising import and services prices.

The NZ dollar fell against the pound to 43.58 from 43.86 at 5pm yesterday and edged down against the euro to 0.5021 from yesterday's 0.5026. It rose to 63.12 yen from 63.09 yen yesterday.

The trade weighted index was 64.54 from 64.55 at 5pm yesterday.

- NZPA