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NZ Dollar Held Steady By Conflicting Forces

Fuseworks Media
Fuseworks Media

Wellington, June 18 NZPA - The New Zealand dollar was subject to competing pressures that kept it in check today.

Bank of New Zealand currency strategist Danica Hampton said the kiwi was trapped by the "countervailing forces" of a weaker US dollar and lingering concerns about the health of the New Zealand economy.

It closed on US75.62c, virtually unchanged from yesterday's close.

The greenback fell against the euro on a report that US housing starts plunged to their lowest level in more than 17 years in May, casting more doubt over an anticipated early Federal Reserve US interest rate increase.

A flurry of newspaper reporters hosing expectations of a rate cut suggest the Fed has been conducting some judicious leaking.

"Some market players had thought earlier that there may even be a rate rise next week, but the media reports prompted a rethink of such views," said Masafumi Yamamoto, head of foreign exchange strategy for Japan at the Royal Bank of Scotland.

But losses were limited, with traders also paring expectations of tighter monetary policy in the euro zone after European Central Bank executive board member Lorenzo Bini Smaghi said a quarter point hike should bring inflation below its target.

Against the Australian dollar the kiwi slipped to A80.03c at the close from A80.27c. The trade-weighted index firmed to 68.01 from 67.96.

The BNZ's Ms Hampton said the generally weaker US dollar had pushed the NZ dollar to its overnight high against the greenback of US75.73c.

But heavy selling from a variety of "real-money" accounts prevented the kiwi heading higher, she said.

It seemed worries about a sharp slowdown in the New Zealand economy, and increasing conviction the Reserve Bank would be cutting interest rates in the latter half of this year were taking a toll on the NZ dollar.

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