NZ dollar slips amid speculation Fed will further trim asset purchases next week

Thursday 23rd January 2014

The New Zealand dollar fell against the greenback amid speculation the Federal Reserve will further trim its bond buying programme when it reviews policy next week.

The kiwi fell to 83.06 US cents at 8am in Wellington from 83.22 cents yesterday. The trade-weighted index was little changed at 78.81 from 78.86.

The Dollar Index, a measure of the greenback against a basket of currencies, rose as markets latched on to a Wall Street Journal report by Fed watcher Jon Hilsenrath predicting the US central bank will cut another US$10 billion from its monthly asset purchases to US$65 billion when it meets next week. Barring a weak employment report for December, the world's biggest economy has been showing signs of recovery in recent months, giving the Fed scope to pull back its stimulus.

"Keeping the US dollar underpinned are expectations of further tapering," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "That's proving to be a headwind for the kiwi."

Westpac's Speizer said the local currency has support at 83 US cents, though if it breaks below that level, "we should see it go half a cent lower."

The kiwi fell to 50.10 British pence from 50.49 pence after UK government data showed unemployment fell to 7.1 percent, lower than the 7.3 percent markets were expecting, and after minutes to the last Bank of England meeting showed the board was united in its decision to keep interest rates and its asset purchase programme unchanged.

Traders will be looking toward Chinese manufacturing figures later today, while local manufacturing and consumer confidence data are also scheduled.

The kiwi traded at 93.85 Australian cents from 93.81 cents yesterday after government figures yesterday showed faster than expected inflation across the Tasman. The kiwi rose to 86.75 yen from 86.54 yen after the Bank of England maintained its plan to expand its monetary base.

The local currency was unchanged at 61.31 euro cents.

BusinessDesk.co.nz

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