Kiwi holds gains after RBNZ holds rates
Thu, 26 Jul 2012 11:10p.m.
The New Zealand dollar held gains in local trading after getting a leg up from the Reserve Bank decision to keep interest rates on hold, even after last week's benign consumer prices figures.
The kiwi rose to 79.11 US cents at 5pm from 78.88 cents immediately before the announcement at 9am, and was up from 78.31 cents.
The trade-weighted index advanced to 71.81 from 71.26.
Central bank Governor Alan Bollard kept the official cash rate at 2.5 per cent for an 11th straight meeting, saying the threat of a rapid deterioration in Europe was lingering over New Zealand's trading partners.
Still, he said he expected inflation to the middle of the bank's 1 per cent and 3 per cent band, even after the second-quarter consumer prices index showed annual inflation was right at the bottom of the range.
Dr Bollard "pretty much kept to the script from the recent monetary policy statement, and there's been a bit of positioning as people were expecting a more negative sentiment", said Dan Bell, currency strategist at HiFX in Auckland.
The kiwi has "found support, and there's a good chance we might see a bit more of a short squeeze where it gets taken back up to the 80.50 US cents mark".
Investors were more upbeat about risk-sensitive assets in the London and New York trading sessions after European Central Bank member Ewald Nowotny threw his support behind issuing the region's rescue fund with a banking licence.
That would let the European Stability Mechanism access to cheap central bank funding.
The New Zealand dollar rose to 61.82 yen from 61.21 yen, and gained to 76.68 Australian cents from 76.48 cents.
It climbed to 65.16 euro cents from 64.83 cents, and advanced to 51.10 British pence from 50.45 pence.
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