Kiwi drifts lower but gains in store

The New Zealand dollar drifted lower against the greenback, with little in the way of major data to give it a steer, but the currency may gain ground ahead of the European Central Bank's rates announcement on Thursday.

The kiwi recently traded at US80.75 cents, down from US81.04c at 8am, while on the Trade Weighted Index of major trading partners' currencies it fell to 72.78 from 72.92.

Imre Speizer, a market strategist with Westpac, said despite the softness in the currency today, risk assets continue to be driven by hopes the ECB will unveil a large scale economic intervention later this week.

That's most likely involve the European Stability Mechanism being handed a banking license, allowing the rescue fund to borrow directly from the EBC and give it more freedom to help ailing member states.

"The market was quite strong at the open and we've tailed off since then, but that's nothing more than a bit of profit taking," Speizer said. "Where we are at now is where the currency was at three in the morning on Friday, but we are still well ahead of where we were at the close in kiwi time."

Westpac predicts growth-linked currencies such as the kiwi and Australian dollar will continue to gain ground ahead of the ECB announcement, but any disappointment from policymakers is likely to trigger sharp falls.

On the crosses, the kiwi recently traded at 77.16 Australian cents, down from A77.21c at 8am, and it fell to 63.30 yen from 63.57 yen.

The New Zealand dollar rose to 65.72 euro cents from 65.68 euro cents, and it slipped to 51.35 pence from 51.45 pence.

The kiwi may trade as high as US82c, Speizer said.