KEY POINTS:
The New Zealand dollar dipped against both the Australian and US dollars today.
At 5pm the kiwi had slipped to A88.88c from A89.12c at 5pm yesterday. The kiwi began falling yesterday following strong Australian retail sales data and the well-received Australian budget did nothing to turn the trend around.
Against the greenback, it eased to US73.65 from US73.97c at 5pm yesterday.
There was little local response to comments from Reserve Bank executives today that the movement in the kiwi had stayed orderly and investors' demand for its high yield was expected to remain high.
Bank governor Alan Bollard in his half yearly report on the banking system said that while the New Zealand dollar has been volatile at times due to high trading volumes, movements have been orderly.
He said demand for carry trades, where investors' borrow in low-yielding currencies and invest in high-yielding ones, were expected to remain the main driver of the currency.
He expected substantial upcoming maturities in Eurokiwi and Uridashi bonds to be met with continued offshore issuance of these bonds.
Australian treasurer Peter Costello's big-spending pre-election budget, giving every Australian a tax cut and outlining a massive increase in education funding was largely as expected.
During the next four years, the Australian government will cut taxes by A$30 billion ($34b) and spend a further A$35b on measures tackling issues such as climate change, dental health, road and rail infrastructure and boosting superannuation savings for low and middle income earners.
The kiwi was little changed on other major crosses and the trade weighted index ended on 71.45 from 71.62 yesterday.
Both the Australian and New Zealand dollars slipped 0.3 per cent against the Japanese currency as carry trades were trimmed back.
Some traders said Japanese investors were selling dollars to bring home funds tied to some US$55 billion of US Treasuries maturing next Tuesday as well as US$22 billion of coupon payments.
In the majors, the US dollar dipped against the yen but was mostly steady as investors looked to see if the Federal Reserve would give any signals to back up market expectations for an interest rate cut later in the year.
The yen posted broad gains as investors took profits on carry trades -- using the low-yielding Japanese currency to fund purchases of higher-yielding currencies and assets -- before this week's string of central bank meetings.
The single European currency was flat at US$1.3544 holding off the lifetime high of US$1.3683 struck in late April.
NZ dlr/US dlr US73.65c
US73.97c
NZ dlr/Aust dlr A88.88c A89.12c
NZ dlr/euro 0.5440 0.5432
NZ dlr/yen 88.23 88.65
NZ dlr/stg 37.01p 37.05p
NZ TWI 71.45 71.62
Australian dollar US82.89c US83.03c
Euro/US dollar 1.3542 1.3616
US dollar/yen 119.78 121.11
- NZPA