NZ dollar gains as sell-off over Fed tapering slows down

Thursday 4th July 2013

The New Zealand dollar gained against the greenback as investors slowed down the liquidation of their trans-Tasman holdings, which they embarked on amid growing expectations the Federal Reserve will start unwinding its money printing programme.

The kiwi rose to 77.79 US cents at 5pm from 7.68 cents at 8am and 77.41 cents yesterday. The trade-weighted index rose to 74.07 from 73.85 yesterday.

The Australian dollar hit a three-year low and the kiwi is near 12-month lows since investors decided to return to the greenback on the expectation the Fed will slow down its bond-buying programme this year. US markets will be closed on Thursday for the Independence Day holiday, though non-farm payrolls figures on Friday will be closely watched, with the Fed wanting to see a lower unemployment rate.

"Expectations of the Fed tapering this year seem overpriced and overblown," said Dan Bell, currency strategist at HiFX in Auckland. "We may have found a little bit of a base in the New Zealand dollar around 77 US cents."

Still, any gains may be muted due to the ongoing uncertainty in Egypt after President Mohamed Mursi was removed by the military yesterday.

"Investors are liquidating their emerging market positions and the Aussie and kiwi get tarred with the emerging markets brush," Bell said.

The kiwi gained to 59.87 euro cents from 59.68 cents yesterday and traded at 50.97 British pence from 51.07 pence, ahead of the European Central Bank and Bank of England meetings. Neither monetary authority is expected to make any change to their respective key rates.

The local currency rose to 85.40 Australian cents from 84.96 cents yesterday after the Reserve Bank of Australia kept the door open for another rate cut when it review monetary policy on Tuesday. Deputy governor Philip Lowe said markets misinterpreted governor Glenn Stevens' comments yesterday, which sent the Australian dollar lower.

The kiwi fell to 77.68 yen from 77.89 yen yesterday.

BusinessDesk.co.nz

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