Kiwi steady ahead of rates announcement

There was solid demand for the New Zealand dollar ahead of this morning's monetary policy statement by the Reserve Bank of New Zealand.

The kiwi peaked at US70.97c in overnight trading before easing back to US70.62c at 8am - barely changed from its US70.63c level at 5pm yesterday.

ANZ economist Mark Smith said in a market briefing this morning that given market positioning, an extension higher was possible for the New Zealand dollar should the monetary policy statement be more upbeat.

"Positive global sentiment was enough to supercharge the NZD yesterday and overnight. It opens the day close to overnight highs and looking able to take on the world," he said.

Solid demand throughout the night for the kiwi had built a base around US70.40c which would only be tested if the Reserve Bank pushed out its previous call to lift the cash rate in the middle of the year. On the topside a break higher may well run out of initial steam at US71.26c, Mr Smith said.

Many holding short NZ dollar and long Australian dollar positions were nervous around today's statement, he added.

The central bank was expected to keep the official cash rate unchanged at 2.5 per cent. The Reserve Bank of Australia has already hiked its rate to 4 percent but the New Zealand economy is not performing as well as the Australian economy.

The NZ dollar rose to A77.27c at 8am from A77.07c at 5pm.

The kiwi also firmed against the yen - to 63.93 from 63.55 - but eased against the euro - to 0.5176 from 0.5190.

The trade weighted index firmed to 65.29 at 8am from 65.26 at 5pm.

- NZPA