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NZ dollar trades in narrow range ahead of rate decision

Monday 24th January 2011

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The NZ dollar had a quiet weekend and it is expected to trade in a narrow range today with the market reduced by the Wellington Anniversary holiday.

The NZ dollar was at US75.85c at 8am from US75.64c at 5pm on Friday

Westpac said that both the Australian and NZ dollars had a quiet weekend.

"The aussie had a couple of forays above US99.00c, but gains were limited. The NZ dollar opened the New York session round the US75.85c level and closed more or less unchanged, Westpac said.

The NZ dollar fell to a three-week low on Friday after underlying trends in retail sales data suggested the economy was weak.

The focus this week is turning to an interest rate decision by the Reserve Bank of New Zealand (RBNZ) on Thursday.

"We think NZ dollar under-performance will continue as the RBNZ decision looms," ANZ said.

The RBNZ is expected to hold the official cash rate at 3% and to keep to the script of its December statement, economists said.

Westpac economists note that fuel prices are rising, and food price inflation will also need to be watched closely in 2011.

"But setting these factors aside, this is not an economy that's generating a lot of inflation under its own steam right now."

Goldman Sachs said the economic data has vindicated the RBNZ's dovish stance in its December monetary policy statement.

"As a result, we expect a similar cautious message to be delivered," Goldman Sachs said.

The euro was strong during the weekend and the NZ dollar eased to 0.5572 euro this morning from 0.5600 euro on Friday.

The NZ dollar was A76.58c at 8am from A76.54c on Friday.

It was at 62.65 yen from 62.73 yen on Friday, while the trade weighted index was unchanged at 67.85.



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