(Updates prices, adds more comment)
* New Zealand dollar falls from highs after intervention
* Dollar steadies but still broadly weak
* Ukraine crisis supports safe-haven bid for yen
* Eyes on Yellen speech for more clues on Fed's rate path
By Patrick Graham
LONDON, May 7 The New Zealand dollar was the
main mover on developed currency markets on Wednesday, falling
almost one percent after its central bank warned it could
intervene against a currency boosted by rises in official
The Reserve Bank of New Zealand has led its peers this year
in raising interest rates, driving a 13 percent rally for the
kiwi against the U.S. dollar since last August.
The U.S. currency's failure so far to make good on
predictions of a surge this year - it languished close to
six-month lows against a basket of major currencies on Wednesday
- have helped extend that rise.
New Zealand's central bank governor Graeme Wheeler, who
intervened against its currency at slightly weaker levels a year
ago, said the bank could sell the kiwi if it stayed strong in
the face of worse fundamentals such as a further fall in export
He also said further currency strength would be a factor in
future moves on interest rates although several strategists in
London cast doubt on whether that would prevent the bank from
hiking official rates further.
"The question for the last three months has been whether
there was too much good news in the price for the kiwi ...
clearly some of that has come into play," said Jane Foley,
strategist with Rabobank in London.
"New Zealand's fundamentals are still strong enough to
justify (buying the kiwi) but perhaps there is less reason to be
gung ho on interest rates than before and pushing toward 88 per
dollar is going to be a little bit more difficult from here."
The currency steadied somewhat ahead of U.S. markets opening
but was still down 0.7 percent on the day to trade at $0.8675,
more than a cent below almost three-year high of $0.8779 hit on
Still, the message from most analysts remained fairly
"I would be reluctant to go too far with the story markets
have bought into overnight," said Adam Cole, global head of
currency strategy with RBC Capital Markets in London.
"On intervention it is a warning but I don't read it as a
threat or a clear signal they will intervene."
The U.S. dollar took a step lower when London returned from
a holiday on Tuesday and investors are braced for the
possibility that dovish comments from Federal Reserve Chair
Janet Yellen could further undermine the greenback.
The U.S. central bank's new chief is widely expected to
hammer home its dovish position at her congressional hearings on
Wednesday and Thursday, even after last Friday's upbeat U.S.
"Yellen does have the potential to inject some life into the
dollar but I think she is going to be cagey," said Foley.
"The market needs to be convinced that the Fed is going to
raise rates earlier than it currently does. We need some more
and better data (to do that). For now everyone looks happy to
sell any dollar rallies."
Many analysts and traders view the Fed's communication since
Yellen's arrival as somewhat garbled. An initial nod towards a
rise in interest rates in the first half of next year was
quickly talked down by policymakers and there is little faith
the Fed will follow its reining-in of bond-buying with actual
rate rises anytime soon.
That, along with flows of capital into European capital
markets and the European Central Bank's inability to take more
concrete action to weaken the euro, has left this year's
predictions for a stronger dollar looking exposed.
"It now seems quite likely that we could see a test of $1.40
(per euro) very soon, especially if we break the strong
resistance level at 1.3967 - the 2014 high," Danske Bank
analysts said in a morning note. "The Yellen speech or inaction
from the ECB (at a policy meeting) tomorrow could be potential
Against the euro the dollar was steady at $1.3927, within
sight of two-month highs of $1.3952 hit on Tuesday.
Against the yen, the U.S. currency recovered from a
three-week low of 101.43 yen to trade flat on the day at
101.69. The dollar index was last at 79.135, up slightly
on the day but not far from the previous session's trough of
(Editing by Pravin Char)