Markets calm, kiwi stung by RBNZ comment

SYDNEY Wed May 8, 2013 5:23am IST

1 of 3. Euro and U.S. dollar banknotes are seen in this picture illustration taken in Prague January 23, 2013.

Credit: Reuters/David W Cerny

SYDNEY (Reuters) - Major currencies got off to a sleepy start in Asia on Wednesday following an uninspired session overnight, but the New Zealand dollar stood out after the central bank complained it was overvalued, prompting markets to briefly sell the kiwi.

The euro stood at $1.3075, having drifted between $1.3068-$1.3132 on Tuesday, a range that was slimmer than that of the previous session when key markets including Tokyo and London were shut.

Traders said that showed the market has little conviction to drive the common currency either way for now. Even an unexpected jump in German industrial orders and healthy demand for Portuguese government bonds at an auction failed to spice up a dull overnight session.

Still, analysts at BNP Paribas suspect the euro has room to rise, believing the strong reading on German industrial orders has probably reduced the risks of a downside surprise for today's German production release.

"We think risk-reward remains attractive for EUR longs heading into the data," they wrote in a note.

Against the yen, the euro was a touch softer at 129.21, but still within striking distance of a 3-year peak of 131.10 set last month.

The dollar was also a shade lower on the Japanese currency at 98.76, having repeatedly failed to clear the 4-year peak near 100 reached last month.

The lack of any drama in currency markets stood in contrast to equity markets, which saw U.S. and German stocks .SPX .GDAXI close at record highs.

All that left the spot light on the Antipodean currencies, as investors reacted to comments and action from their respective central banks.

The kiwi shed roughly 20 pips in early trade to low of $0.8435 after the Reserve Bank of New Zealand reiterated that an overvalued currency was hindering the rebalancing of the economy.

It was last at $0.8456 with initial support seen around $0.8414, the 76.4 percent retracement of its April 23-30 rally.

The kiwi's decline came a day after an interest rate cut in neighboring Australia sent the Aussie sliding nearly 1 percent towards $1.0150.

The Reserve Bank of Australia reduced the cash rate by a quarter point to a record low 2.75 percent and left the door open to more easing.

The Aussie has since edged back up to $1.0174, although the threat of a break below the March 4 trough of $1.0116 remains a real possibility in the near term.

Traders said renewed worries about economic growth in China, Australia's single biggest export market, could see Aussie bears target the downside.

China is due to report a host of economic data in the next few days, including trade numbers later on Wednesday, inflation on Thursday and industrial output and retail sales on Monday.

"If China's trade balance jumps back to the expected $15.5 billion surplus or higher, AUD/USD's $1.01 handle will be very short lived and will bounce back to $1.022," said Evan Lucas, market strategist at IGMarkets.

"China's slowing over the last month should be taken with a wry smile, as further tightening from the central government should abate and fears of China crashing should also subside."

Australia's employment report on Thursday will also bear watching, with any weakness likely to deal the Aussie dollar a further blow.

(Editing by Wayne Cole)

Politics

REUTERS SHOWCASE

Fund Raising

Fund Raising

Flipkart raises $700 million in fresh funding.   Full Article 

Reforms Push

Reforms Push

Modi may order insurance, coal reforms if vote delayed - officials.  Full Article 

Reuters Exclusive

Reuters Exclusive

India looks to sway Americans with nuclear power insurance plan  Full Article 

To Boost Growth

To Boost Growth

Crank up public spending to revive growth - chief economic adviser.   Full Article 

Bold Steps

Bold Steps

SpiceJet rescue plan marks bold bet on Indian aviation recovery.   Full Article 

New Airline

New Airline

Tata, Singapore Air venture Vistara to take off on Jan 9.  Full Article 

Online Sales

Online Sales

Knock knock. Who's there? Amazon's best-selling holiday author.  Full Article 

Hacking Attack

Hacking Attack

N.Korea says did not hack Sony, wants joint probe with U.S.  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage