NZ dollar rises even though OCR kept unchanged
The New Zealand dollar rose today as the US dollar weakened slightly and as investors adjusted estimates of the resumption of a policy tightening cycle even though the Reserve Bank of New Zealand (RBNZ) kept the official cash rate at 3 percent.The NZ doll
The New Zealand dollar rose today as the US dollar weakened slightly and as investors adjusted estimates of the resumption of a policy tightening cycle even though the Reserve Bank of New Zealand (RBNZ) kept the official cash rate at 3 percent.
The NZ dollar was US74.80c at 5pm, up from US74.33c at 7.30am and little changed from US74.70c at 5pm yesterday. Earlier it dropped close to US74c, its lowest level in more than three weeks.
RBNZ governor Alan Bollard said that while it was appropriate to keep the official cash rate on hold today, it remained likely that further removal of monetary policy support would be required at some stage.
BNZ said the phrase "at some stage" was an addition from September’s statement and advised investors to "make of that what you will."
The central bank certainly acknowledged generally disappointing economic data, but also highlighted that the medium-term outlook for the economy remained broadly in line with the September monetary policy projections.
So it was back to data-watching for investors and anticipating the eventual tightening.
Goldman Sachs&Partners New Zealand expects the tightening cycle to resume in March rather than January with the official cash rate rising to 4 percent by the end of 2011.
The US dollar market was mixed. The recent short-covering rally in the US dollar paused but a rise in US bond yields is seen as a supportive factor. Investors are jittery ahead of the US midterms elections and a Federal Reserve policy meeting, both set for early next week.
The NZ dollar slipped to A76.58c at 5pm against the Australian dollar from A76.78c at the same time yesterday. It was at 0.5411 euro from 0.5407 euro yesterday and at 60.99 yen from 61.05.
The trade weighted index was 66.69 at 5pm from 66.70 yesterday.
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