NZ dollar stalled as investors await OCR review

The kiwi was trading at 69.11 US cents at 5:05pm.

The New Zealand dollar is little changed ahead of tomorrow's review of the official cash rate by the Reserve Bank.

The kiwi was trading at 69.11 US cents at 5:05pm in Wellington from 69.04 at 8:32am while the trade-weighted index was at 74.76 points from 74.72.

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"Currency volatility is the lowest we've seen for a long time. That's quite unusual, considering what's going on in interest rate markets and in equities markets," says Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

Global share markets have been very volatile, particularly in the United States where the benchmark S&P 500 Index had been threatening to break above previous records, only to be slammed down 2.35 per cent overnight as fears the US economy may be heading into recession took hold.

That's been fuelled by three-month Treasury bills starting to trade at higher yields than 10-year Treasury bonds, a classic signal of recession.

New Zealand's longer-term interest rates have been following US rates lower and today yields on both the 10-year government bond and the 10-year swap rate fell to record lows.

The 10-year government bond yield fell as low as 1.89 per cent where it ended the session, while the 10-year swap rate fell as low as 2.1225 per cent from 2.2200 percent yesterday before closing at 2.1750 per cent.

The two-year swap rate was higher at 1.7809 per cent from 1.7728 per cent.

Kelleher says the OCR decision, due 2pm Wednesday, may provide an excuse for the currency to break out of its current trading range.

The central bank is expected to hold the OCR at its record low of 1.75 per cent and to reiterate that the next move could be either up or down, depending on how the data plays out.

Reserve Bank governor Adrian Orr is also giving a speech on monetary policy on Friday.

"The longer it goes sideways with low volatility, the greater the move we will get. It's the calm before the storm," Kelleher says.

Earlier, the currency got a small boost from better than expected trade figures. The showed a $12 million surplus for February, down from a $188m surplus in the same month last year, but the market had been expecting a deficit.

The New Zealand dollar was trading at 97.02 Australian cents from 97.14, at 52.34 British pence from 52.33, at 61.06 euro cents from 60.01, at 76.05 yen from 75.94 and at 4.6358 Chinese yuan from 4.6318.