The New Zealand dollar fell slightly on the day but is headed for a 1.2 per cent weekly gain after the Reserve Bank surprised the market last Wednesday with a less dovish than expected monetary policy statement.

The New Zealand dollar was trading at 68.26 US cents at 5pm in Wellington from 68.39 at 8am. The traded-weighted index eased to 74.21 points from 74.31.

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"We're up on the week simply because of the market response to an aggressively neutral central bank," says Peter Cavanaugh, the senior client advisor at Bancorp Treasury Services.

Reserve Bank governor Adrian Orr left his official cash rate unchanged at the record low of 1.75 per cent where it has sat since November 2016 and said the next move could be either up or down.


However, the Reserve Bank's forecasts predict a rate hike occurring in the March or June quarters of 2021, months later than it was forecasting last November.

After ending in New York last week at 67.44 US cents, the currency rallied to a high of 68.56 cents after the MPS where it met resistance.

"It didn't want to go up any more so the market said, 'let's see if we can push it down a bit,'" Cavanaugh said.

As for other reasons for the slight weakness today, he said "the world's just a little bit more worried". The "usual suspects" are to blame, including Britain's Brexit from Europe, politics in the United States and the trade tensions between the US and China.

Asked where to from here, "to repeat the themes from central banks, the shock risk is to the downside," Cavanaugh says.

A White House official said President Donald Trump will sign a spending bill that doesn't include the funding he sought to build a wall on the border with Mexico but which passed with overwhelming support from both the house of representatives and the Senate.

Trump will then declare a state of emergency so he can take money already allocated to deal with disasters to fund the wall, the official said.

That is sure to spark a constitutional crisis over whether the president is exceeding his powers by seizing the power of the purse from Congress.


With six weeks to go before the official Brexit deadline, Britain's Prime Minister Theresa May has lost yet another key vote in parliament aimed at staving off a "hard Brexit" with no agreement with the rest of Europe.

As for the US/China trade talks, the latest news from the US side is that Beijing is offering only "cosmetic, non-impactful offers" and is stonewalling on substantive issues.

The kiwi was trading at 96.22 Australian cents from 96.24, at 53.33 British pence from 53.42, at 60.46 euro cents from 60.51, at 74.21 yen from 75.63, and at 4.6245 Chinese yuan from 4.6314.

The two-year swap rate is at 1.8880 per cent from 1.9030 yesterday; the 10-year swap rate is at 2.4724 per cent from 2.4850.