NZ dollar little changed as delayed US data likely to form view on Fed tapering

Monday 21st October 2013

The New Zealand dollar was little changed in local trading ahead of a slew of US data this week, after the Federal government re-opened, which may provide clues to how long the Federal Reserve will put off slowing its asset purchase programme.

The kiwi traded at 84.85 US cents at 5pm in Wellington from 84.81 cents at 8am and 84.60 cents on Friday in New York. The trade-weighted index edged up to 78.16 from 78 at the Wellington close on Friday.

Investors are eyeing up risk-sensitive assets again after the protracted negotiations to pass the Federal budget and raise the US debt ceiling prompting a partial shutdown of government services looks likely to have slowed growth in the world's biggest economy.

That's expected to feed into the Fed's view of the economy, and further delay its plans to start tapering down its US$85 billion monthly asset purchases. The release of US data, including September non-farm payrolls, has delayed because of the shutdown, and is set for publication this week.

"The US tapering story has been deferred until next year in light of the shutdown," said Dan Bell, head of corporate sales at HiFX in Auckland. "The overall repositioning looks like a return to the carry trade, favouring the flightless bird," he said, referring to the kiwi.

Bell said the New Zealand dollar is finding resistance at 85 US cents, but will probably try to push towards 86.74 cents, a high it made earlier this year.

A BusinessDesk survey of 10 traders and strategists predicts the local currency may trade between 83.50 US cents and 86.20 cents this week. Seven expect the currency to advance while two say it may remain unchanged and one predicts it will fall.

The local economic recovery is also supporting demand for the kiwi, and government figures today showed net inbound migration hit a 10-year high in September as fewer people left New Zealand for Australia and as more people immigrated here.

The kiwi rose to 83.09 yen at 5pm in Wellington from 82.90 yen on Friday, and was little changed at 87.84 Australian cents from 87.86 cents last week. It increased to 62.05 euro cents from 61.89 cents last week, and gained to 52.51 British pence from 52.37 pence.

BusinessDesk.co.nz

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