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NZ dollar steady, swaps rally as rates bet shifts

Published: 19 Nov 2009 17:54:01 PST

WELLINGTON, Nov 20 - The New Zealand dollar <NZD=> steadied above two-week lows on Friday while swap rates fell as investors pared down expectations for an early rise in interest rates.

* Kiwi around opening level $0.7302/07, after dipping to $0.7273 in offshore trade, the lowest since Nov. 9, as risk appetite slumped on an uncertain global economic outlook. Kiwi has risen almost 30 percent since the start of the year.

* Market paring down expectations of a New Zealand rate rise as investors reassess risk amid signs a global economic recovery may be losing steam.

* Financial markets now only price in a 40 to 60 percent chance of a rate hike in March, shifting the first increase to April, analysts say.

* One-year swap rates <NZDIRS> fell to around 3.42 percent, from 3.47 percent early this week.

* A Credit Suisse measure <CSRBNZ1Y=CSAU> shows the market is now pricing in around 172 basis points of tightening for the next 12 months, down from 214 basis points early last week.

* The Reserve Bank of New Zealand has pledged to keep rates at record low 2.5 percent until the second half of next year. Markets have bet the strength of NZ's recovery will be quicker and stronger than the RBNZ has been forecasting.

* Kiwi at two-week low against the euro <NZDEUR=R>, and weaker against the Aussie <NZDAUD=R> and the yen <NZDJPY=R>, sending the trade-weighted index <=NZD> down 0.9 percent.

* Broad support seen from $0.7290 and resistance around $0.7400.

* NZ bonds firmer as investors chase local yields and after U.S. Treasury debt prices gained on a sell-off on Wall Street, fuelling a safety bid for bonds. Local yields up to six basis points lower. -------------(20 November 2009 12:51 / 2351 GMT)-------------

(Last prices as at 6pm NZ time the previous day) 90-DAY LIVE 2.79 (2.79) NOV-2011 4.085 (4.140) 90-DAY (DEC) 97.23 (97.24) APR-2013 4.795 (4.855) 90-DAY (MAR) 97.02 (96.99) DEC-2017 5.645 (5.660) 90-DAY (JUN) 96.40 (96.36) MAY-2021 5.940 (5.960) RBNZ MCI 241 (281) US 10YR BOND 3.342 (3.360) NZD TWI 65.16 (65.70) AU 10YR BOND 5.475 (5.472) NZD/USD 0.7303(0.7368) NZ/US 10YR SPD +230bp(+230bp) NZD/AUD 0.7941(0.7979) NZ/AU 10YR SPD +17bp (+19bp) NZD/EUR 0.4895(0.4941) NZ 2YR SWAP 4.470 (4.360) NZD/JPY 64.95 (65.67) NZ 5YR SWAP 5.590 (5.590) --------------------------------------------------------------- - (