The New Zealand dollar consolidated above one-year lows on Thursday, but looming interest rate cuts and a firmer U.S. dollar restricted any major advances.

The currency bounced off its lows on bargain hunting after falling to $0.6735, its lowest since August 2007, on Wednesday as investors abandoned positions in high-yield currencies on global growth worries.

“The kiwi has been struggling on the back of the interest rate and risk story, but I think we’ll start to consolidate around here,” said Daniel Brdanovic, senior manager treasury at HSBC.

At 0500 GMT, the New Zealand dollar was at $0.6815/25, compared with $0.6748/53 in late local trade on Wednesday. It traded a relatively tight local range of $0.6816 to $0.6855.

The kiwi recovered slightly against the yen to last trade about 73.65 yen . It had fallen more than 2 percent to a two-year low of 73.17 on Wednesday as Japanese investors exited risky high yield investments.

The New Zealand economy is widely seen in a recession, with a further rate cut expected when the central bank meets on Sept. 11 to follow a 25 basis point easing in July.

A Reuters poll has all 17 economists picking at least a 25 basis point cut to the 8 percent official cash rate, with rates seen at 7.25 percent by the end of the year.

The U.S. dollar eased from an eight-month high against the euro, as investors awaited interest rate decisions from the European Central Bank and the Bank of England.

New Zealand bonds gained, with the yield on the benchmark 10-year government bond , which moves inversely to the price, three basis points lower at 5.96 percent.

Source: http://www.afxnews.com

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