KEY POINTS:
Currency traders shrugged off comments from Finance Minister Michael Cullen and sent the kiwi higher today.
It had opened on yesterday's closing level of US74.67c and ended the session half a cent higher on US75.22c.
Traders said the comments had little impact as New Zealand officials often air
displeasure about strength in the currency.
Dr Cullen told Reuters New Zealand's currency was still somewhat overvalued, though its equilibrium level was higher than it was five years ago.
He said the kiwi was more likely to head lower than higher in the medium term.
"The dollar is still above where we might regard its normal range, equally however, most people would argue the equilibrium level of the dollar is now higher than it was five years ago and certainly 10 years ago," he said.
Dr Cullen declined to specify the kiwi's equilibrium level, but said economists now see fair value around the high US50c to low US60c area.
ANZ bank said today that a couple of attempts to sell the kiwi lower through support around US74c were thwarted by solid demand on crosses.
The NZ dollar, as attractive as its yield advantage was, would remain hostage to global sentiment and continue to trade off US equities, ANZ said.
Against the Australian dollar the kiwi has edged up from a low early yesterday of A83.60c. At 5pm the NZ dollar was buying A84.16c from A84.12c at 5pm yesterday.
ANZ said tests of support for the NZ dollar against the aussie easily held yesterday as local exporter demand and offshore buying of the NZ dollar were enough to provide a bounce.
The trade weighted index closed on 70.56 from 70.32 at 5pm yesterday.
The US dollar slipped after data showed housing starts sank to a 14-year low last month cranked up speculation that the Federal Reserve may cut interest rates.
Traders said recuperating regional stocks were prodding the yen lower despite expectations that Group of Seven finance officials may discuss currencies in the context of the overall economy when they meet in Washington on Friday.
"The yen has weakened because the carry trade remains well bid," said Sean McGoldrick, head of forex trading at Morgan Stanley in Tokyo.
The dollar also smarted due to a surge in oil prices to a record high and rising tensions between Turkey and Kurdish rebels in Iraq, which escalated geopolitical concerns in the currency market.
Reuters currency rates:
5pm today 5pm yesterday
NZ dlr/US dlr US75.22c US74.76c
NZ dlr/Aust dlr A84.16c A84.12c
NZ dlr/euro 0.5284 0.5276
NZ dlr/yen 87.57 87.22
NZ dlr/stg 36.86p 36.79p
NZ TWI 70.56 70.32
Australian dollar US89.32c US88.92c
Euro/US dollar 1.4231 1.4172
US dollar/yen 116.44 116.67
- REUTERS, NZPA
