Dollar little changed as RBA holds the line, traders watch Greece

The New Zealand dollar traded in a 20 basis point range in local trading as the Reserve Bank of Australia kept interest rates unchanged and as markets continue to watch the fallout from Greece's vote against adopting harsh austerity measures to access bail-out funds.

The kiwi was little changed at 66.61USc at 5pm in Wellington from 66.84USc at 8am and 66.71USc yesterday. It fell to 88.97Ac from 89.20Ac yesterday.

The RBA kept the target cash rate at 2%, saying "monetary policy needs to be accommodative" as growth remains below trend. Governor Glenn Stevens said the RBA will continue to monitor "economic and financial conditions" on whether the current level of support will stoke growth.

The central bank decision comes as investors continue to watch the posturing between Greece and its creditors after a referendum voted against adopting stricter austerity measures. The resignation of Greece's finance minister, Yanis Varoufakis, is seen as paving the way for better relations between the Mediterranean nation and European policymakers, who will hold an emergency summit on Tuesday in Brussels. The kiwi was little changed at 60.38 euro cents from 60.49 cents yesterday.

"The market thinks there are enough stopgap measures to stop the world going to hell in a hand-basket and it's awaiting what the ECB [European Central Bank] does and what the politicians do," said Imre Speizer, senior market strategist at Westpac Banking Corp in Auckland. "The kiwi has traded in an incredibly tight range."

New Zealand business confidence fell to its lowest level in three years in the NZ Institute of Economic Research's quarterly survey of business opinion, with firms increasingly downbeat on their own profitability. The survey doesn't cover the agricultural sector, which grew increasingly pessimistic in last week's ANZ Bank Business Outlook.

The slump in dairy prices and its deteriorating effect on the terms of trade prompted New Zealand's Reserve Bank to cut the official cash rate a quarter point to 3.25% last month, and traders are pricing in a 98% chance of a cut at its July 23 review.

New Zealand's two-year swap rate increased to 2.94% at 5pm in Wellington from 2.93% yesterday, while the 10-year swap rate fell to 3.82% from 3.86%.

The local currency was almost unchanged at 4.1361 Chinese yuan from 4.1367 yuan yesterday as Chinese equity markets whipped around, with the Shanghai Composite Index down 3.2% in afternoon trading, having slumped 27% in the past month.

The kiwi dollar was little changed at 42.72 British pence from 42.89p yesterday, and traded at ¥81.70 from ¥81.63 yesterday.

(BusinessDesk)