NZ dollar drifts lower as investors mull US recovery; RBNZ financial stability report eyed

Tuesday 12th November 2013

The New Zealand dollar drifted lower in local trading as investors mull the prospects of the US economic recovery and look ahead to tomorrow's financial stability report from the Reserve Bank.

The kiwi fell to 82.30 US cents at 5pm in Wellington from 82.43 cents at 8am and 82.82 cents yesterday. The trade-weighted index slipped to 77.05 from 77.41 yesterday.

Investors are weighing up the prospects for the US Federal Reserve to start tapering its monetary stimulus after last Friday's strong jobs report, and after Northern Hemisphere markets were quiet on Monday's US holiday.

"US data is the main theme, and people are watching the November numbers for a cleaner read," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "The US dollar is still going up because of Friday's report."

The greenback extended its rally, helped by continuing concerns about the strength of Europe's economy amid reports of dissent by European Central Bank members on the vote to cut rates last week.

Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland, said the reported discord in the ECB underpinned strength in the greenback.

"We're coming into winter in Europe and the chances are, we aren't going to get much better," he said.

Traders will be watching the Reserve Bank's financial stability report tomorrow for any hint on how the monetary authority's loan restrictions are faring after their first month, and whether governor Graeme Wheeler will try to talk down the kiwi dollar, which he has said will give him "greater flexibility" in hiking rates if it stays persistently high.

Real Estate Institute of New Zealand figures today showed the pace of sales volume growth slowed last month, though the median sale price reached a new record.

ASB's Kelleher said the kiwi may drift off further, though should find support at 81.85 US cents, with topside resistance at 82.75 cents.

The New Zealand dollar slipped to 88.18 Australian cents from 88.26 cents yesterday, and was little changed at 81.93 yen from 81.96 yen. It dropped to 61.41 euro cents from 61.97 cents yesterday and declined to 51.48 British pence from 51.71 pence.

BusinessDesk.co.nz

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