NZ dollar eases slightly, international backdrop volatile

The New Zealand dollar vacillated below yesterday's levels throughout today's trading.

At 5pm the New Zealand dollar was trading at 73.56USc from 73.60USc at the same time yesterday, a session in which it touched 73.23USc -- the kiwi's lowest level since September 30.

In the wake of the Reserve Bank's trimming of the official cash rate by 50 basis points to 2.5% yesterday, it fell from 73.92USc to 73.31USc, even though the rate cut had largely been factored in by the market as a reaction to the Christchurch earthquake.

Media reported today that the rebuilding of Christchurch could cost as much as $30 billion.

The Reserve Bank is expected to keep the cash rate unchanged for most of this year, but traders are already focusing on inflation pressures and the idea that rates will eventually have to rise again to contain inflation.

"Looking ahead, we think it is important to keep an open mind on future policy settings given the significant uncertainty that surrounds the economic outlook," Deutsche Bank said.

"While we think that policy is now likely on hold for the remainder of this year, we can't rule out the possibility that a modest re-tightening takes place late this year if today's policy action and those put in place by the Government result in a swifter upswing than presently seems likely."

The NZ dollar was at 73.35Ac, compared with 73.17Ac on Thursday afternoon, and barely moved even though the Australian dollar continued slipping against the greenback.

Against the euro, it was €0.5323, up from €0.5303, even though the euro rose from near a one-week low against the US dollar -- and another dozen of 16 currencies the greenback is compared with -- after Chinese reports showed consumer prices and industrial production rose by more than economists estimated.

China's consumer prices rose 4.9% in February from a year earlier, government data showed today, and industrial output expanded 14.9% last month.

The Chinese data is seen as important for both the Australasian currencies, as China is Australia's largest trading partner and New Zealand's second-biggest export market.

The trade weighted index was little changed at 65.26 from 65.17 yesterday.