NZ dollar finds support at 'Goldilocks' level of 65 US cents

The kiwi touched a high of 66.73 US cents over the weekend, and was trading at 65.88 cents at 8am in Wellington, from 65.82 cents at the New York close and 65.87 cents at 5pm on Friday. Photo: NZ Herald.

The New Zealand dollar found support around 65 US cents, which Prime Minister John Key has previously referred to as the "Goldilocks" level - neither too high nor too low - following a sharp decline as traders priced in more interest rate cuts following weak dairy prices.

The kiwi was trading at 65.15 US cents at 8am in Wellington, from 65.11 cents at the New York close and 65.41 cents at 5pm on Friday.

The trade-weighted index edged lower to 69.31 from 69.42 on Friday.

The local currency dropped more than 2 per cent last week after a slump in milk powder prices at the GlobalDairyTrade auction fuelled calls for the Reserve Bank to cut interest rates more aggressively to prop up the country's biggest export sector.

The kiwi's decline appears to have halted for now as traders assess their positions ahead of the Reserve Bank interest rate decision on Thursday.

All economists in a Reuters poll expect a 25 basis point cut this week, although some say there is an outside chance the bank could reduce the rate by as much as 50 basis points.

"For the time being, the 0.65 level looks to provide some support, with the bottom of the trend channel at 0.6480," Bank of New Zealand currency strategist Raiko Shareef said in a note.

"New Zealand dollar does seem due for a period of consolidation, but we would not bank on a material rally, with the fundamental outlook over the near-term rather grim."

In New Zealand today, the BNZ-BusinessNZ performance of services index is scheduled for release at 10:30am.

The New Zealand dollar advanced to 88.30 Australian cents from 88.15 cents on Friday, gained to 60.11 euro cents from 60.03 cents, edged lower to 41.73 British pence 41.83 pence, and slipped to 80.79 yen from 81.13 yen.