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Kiwi Stays Range-Bound Against Greenback

Fuseworks Media
Fuseworks Media

Wellington, March 18 NZPA - The New Zealand dollar continued trading in a narrow range against the greenback today, in the absence of new domestic economic data.

By 5pm the NZ dollar was at US53.01c, having ranged between about US53.06c and US52.79c in the previous 24 hours. It was unable to regain the five-week high around US53.40c reached early yesterday.

BNZ Capital currency strategist Danica Hampton said while the overnight news was relatively encouraging, currencies stayed range-bound.

"There is a lot of talk about option strikes and expiries and this seems to be keeping currencies hemmed in. It's also worth noting, the `fair value' range for NZD/USD (as implied by our short-term valuation model) is currently sitting at 0.5175-0.5375 (up from last week thanks to a widening of NZ-US interest rate spreads)," she said in a market report today.

"As a result, there isn't really a compelling fundamental reason to chase the NZD/USD significantly higher or lower from here (unless you're expecting further changes in NZ-US interest rate spreads, NZ commodity prices or risk appetite)."

Another report today from BNZ Capital pointed out that NZ dollar-denominated uridashi and eurokiwi bond issues had slowed markedly.

Over the past three months, there had been a "paltry" $NZ865 million worth of bond issues, compared with $NZ4.6b that matured in the same period.

"Such negative net issuance suggests that some of the NZD weakness over the past few months may have been related to selling from longer-term real-money investors," the report said.

"And downward pressure from this source looks set to continue."

The NZ dollar eased to 0.4064 euro at 5pm from 0.4085 euro 24 hours earlier, and was also down against the Japanese currency at 52.19 yen from 52.24, and Australian dollar at A80.05c from A80.40c. The trade weighted index slipped to 53.95 from 54.09.

Reuters reported from Tokyo that analysts say investors are starting to feel a little more confident that conditions may be starting to stabilise, helped by a 22.2 percent surge in US housing starts in February and an improvement in German investor sentiment.

This has bolstered the euro and put pressure on the US dollar, which tends to gain when investors become risk averse because it is seen as the safest store of value at time when economies across the globe are contracting.

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