NZ dollar heads for 1.6 percent weekly fall

Friday 22nd November 2013

The New Zealand dollar is heading for a 1.6 percent drop against the greenback this week as world markets drift in the absence of news on the US Federal Reserve's intentions for its US$85 billion a month money-printing programme.

The kiwi fell to 82.09 US cents at 5pm in Wellington from 83.41 cents at the start of the week, and from 81.83 US cents at 8am and 82.55 cents yesterday. The trade-weighted index was at 77.15 from 77.33 yesterday, and is heading for a 0.5 percent weekly decline from 77.54 at the close last week.

A BusinessDesk survey of nine traders and strategists on Monday predicted the kiwi would trade between 81.80 US cents and 85 cents this week, with five expecting it to gain and four saying it would likely stay unchanged.

Investors are second-guessing when the Fed will start dialling back its US$85 billion a month asset purchase programme amid conflicting messages from the US central banks this week. Outgoing chairman Ben Bernanke urged caution in expecting an early tapering, saying the "highly accommodative policies" would be in place for as long as they were needed. The following day, minutes to the last policy meeting showed the Federal Open Market Committee picking signs of growth in the economy that would warrant squirting less new money into the US economy.

"The market's primarily talking about tapering fears," said Alex Hill, head of dealing at HiFX in Auckland. The kiwi dollar has been trading between 81.80 US cents and 84 cents for a while, and Hill said he expects "it will break out (of that range) before Christmas."

US economic data is being closely watched by traders, and yesterday's lower than expected initial jobless numbers supported demand for the US dollar.

Reserve Bank of New Zealand assistant governor John McDermott today said the country's poor savings rate was a major factor fuelling the currency, forcing up interest rates in the hunt for foreign funding. The best way to address that was providing incentives to lift private sector savings.

The kiwi climbed to 89.28 Australian cents at 5pm in Wellington from 88.64 cents yesterday after Reserve Bank of Australia governor Glenn Stevens said yesterday the monetary authority was open-minded about intervention, provided it met its cost-effective measures, which hadn't been the case since the global financial crisis.

The local currency gained to 83.14 yen from 82.85 yen yesterday, and fell to 60.96 euro cents from 61.48 cents. It dropped to 50.71 British pence from 51.29 pence yesterday.

BusinessDesk.co.nz

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