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NZ dollar rises after OCR left unchanged

Thursday 27th January 2011

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The New Zealand dollar rose after the Reserve Bank of New Zealand (RBNZ) was slightly more optimistic about the economy than expected in a statement today.

The central bank left the official cash rate unchanged at 3% but said forward indicators of activity had firmed somewhat. It also said that trading partner activity continued to expand and commodity prices had increased.

The NZ dollar rose to US77.20c from US76.70c on the news, dealers said, within recent ranges. It was at US77.26c at 5pm, from US76.66c at 5pm yesterday.

"Because of some of the recent soft data the RBNZ had an excuse for coming out with a downbeat statement. In the event there was more focus on the positives than the negatives," said Mike Jones, strategist at BNZ.

There is now considerable interest in a speech to a business audience by RBNZ governor Alan Bollard tomorrow at 1pm.

Jones said that overall the market had greeted today's statement as being more upbeat than expected.

The move in the NZ dollar market also came shortly after the Federal Open Market Committee said the United States economy continues to improve, but at a pace that isn't sufficient for the central bank to consider scaling back the Treasury bond-buying programme launched in early November.

Jones said there was little reaction to the FOMC statement in this market.

The Australian dollar eased today on news of a new temporary tax to raise $2 billion to help rebuild infrastructure following floods.

That helped the NZ dollar rise to A77.55c at 5pm from A76.90c at 5pm yesterday. It was at 0.5637 euro at 5pm from 0.5603 at the same time yesterday.

The kiwi was up to 63.44 yen at 5pm having climbed from about 62.90 at 3am. The trade weighted index was 68.79 at 5pm from 68.33 at the same time yesterday.



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