* NZD falls from highs after RBNZ intervention warning
* USD breaks decisively lower after weeks of range trading
* China services report, Aussie retail sales in focus
By Ian Chua
SYDNEY, May 7 The New Zealand dollar tumbled on
Wednesday after the country's central bank warned it may have to
intervene to weaken the currency, while the U.S. dollar
languished at six-month lows against a basket of major
Reserve Bank of New Zealand Governor Graeme Wheeler said if
the currency stayed high in the face of worsening fundamentals,
"it would become more opportune for the Reserve Bank to
intervene in the currency market to sell NZ dollars."
The kiwi dropped more than half a U.S. cent on his comments,
falling as far as $0.8693 from $0.8770 in early trade.
It was last at $0.8707, having erased almost all of its
Still, the kiwi was not far from a 2-1/2 year high of
$0.8779 hit overnight when the U.S. dollar had come under broad
pressure, underscoring New Zealand policymakers' discomfort with
the currency's strength.
The dollar index slid to its lowest in over six
months on Tuesday in a surprisingly decisive move after weeks of
range trading. It was last at 79.139, not far from the trough of
Frustration has been growing among some players at the
dollar's inability to move higher, especially after last
Friday's upbeat payrolls report and as the Federal Reserve
continued to scale back its bond-buying support.
The market seems to be coming to the view that the Fed is
still a long way off from raising interest rates even after the
end of its quantitative easing programme expected later this
Coupled with tame inflation, this has allowed U.S. Treasury
yields to keep falling and thus erode the appeal of the
"The heaviness of U.S. yields seems to be producing further
unwinding of (perhaps long-held) long USD positions," noted Sean
Callow, strategist at Westpac Bank.
Fed Chair Janet Yellen is widely expected to hammer home the
Fed's dovish position at her congressional hearings on Wednesday
"Markets will be attentive for any indication on the Fed's
thinking in terms of rate hike timing and pace, but the message
so far this year has been clear: the timing and pace of hikes is
not predetermined and is data dependent," analysts at BNP
Paribas wrote in a note to clients.
With the dollar on the retreat, sterling climbed to a near
five-year peak of $1.6866, while the Australian dollar
touched a two-week high of $0.9367.
Against the yen, the dollar slipped to a three-week low of
The euro, meanwhile, rose to its highest in two months at
$1.3952, putting more pressure on the European Central
bank to ease policy at its meeting on Thursday.
ECB President Mario Draghi recently said further currency
strength could be a potential trigger for policy action.
The safe-haven yen might gain more momentum if a survey on
China's services sector due at 0145 GMT were to disappoint. For
the Aussie dollar, further strength in the retail sales data due
out at 0130 GMT could offer the currency even more support.
On Tuesday, the Aussie edged up after the Reserve Bank of
Australia kept interest rates steady as expected and appeared
resigned to the currency's strength.
(Editing by Shri Navaratnam)