Dollar declines as traders eye looming RBNZ meeting

New Zealand's two-year swap rate increased one basis point to 2.65 per cent at 5pm in Wellington, and 10-year swaps rose one basis point to 3.46 per cent.

The New Zealand dollar fell, lagging behind other commodity currencies, as traders are wary the Reserve Bank may emphasise its willingness to ease monetary policy when it meets this week.

The kiwi slid to 64.76 US cents at 8am in Wellington, from 64.90 cents at the New York close and 65.24 cents at 5pm on Friday. The trade-weighted index fell to 71.51 from 71.98 on Friday.

The US dollar index, which measures the greenback against a basket of currencies, gained as global equities and oil prices improved, renewing market appetite for riskier assets. However the kiwi lagged behind other commodity-linked currencies as traders eye this week's Reserve Bank meeting, where governor Graeme Wheeler's bias may be leaning more towards future interest rate cuts amid continuing weak inflation.

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"The New Zealand dollar eased back under 0.65 (US cents) despite markets boosting equities, commodities and yield to end the week on a positive note," said ANZ Bank New Zealand senior foreign exchange strategist Sam Tuck. "Markets are looking forward to this week's RBNZ (statement) with markets discussing an RBNZ return to an explicit easing bias."

However, he said the RBNZ already has an easing bias, given it communicated only one-sided risks in its December statement by warning it would reduce rates if circumstances warrant.

"We expect the RBNZ to remain on the same footing, watching with a cautious outlook," Tuck said.

The kiwi will probably trade between 64.60 US cents and 65.80 cents today, he said. Wellington has a public holiday today.

The New Zealand dollar fell to 92.46 Australian cents from 93.17 cents on Friday, ahead of a report on Australian business confidence today.

The kiwi slid to 59.95 euro cents from 60.16 cents on Friday, dropped to 45.34 British pence from 45.91 pence, declined to 4.2604 yuan from 4.2916 yuan, and was unchanged at 76.84 yen.