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Kiwi tops 74 cents for first time since January

Thursday 23rd September 2010

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The New Zealand dollar rose above 74 US cents for the first time since January as talk of further quantitative easing by the Federal Reserve weighed on the greenback, while locally, traders await economic growth figures for the second quarter and Fonterra's annual results.

The US dollar fell and Treasury bonds rallied on the prospect that the Fed will further ramp up its asset purchase programme to deal with concerns about low level of inflation in the world's biggest economy.

The Dollar Index, a measure of the greenback against a basket of six currencies, dropped 0.4% to 79.81. Figures today are expected to show the New Zealand gross domestic product accelerated 0.8% in the three months ended June 30 and Fonterra's outlook statement is expected to be closely watched.

"The lingering effect of FOMC meeting yesterday has been severely US dollar-depressive," said Imre Speizer, markets strategist for Bank of New Zealand. With the GDP data, "anything above 0.5% will not weaken the currency," he said.

The kiwi rose to 73.74 US cents from 73.61 at 8pm yesterday, and touched 74.10 overnight before easing back. It was little changed on the trade-weighted index of major trading partners' currencies, down to 67.02 from 67.07. It rose to 77.19 Australian cents from 77.16 yesterday, and fell to 62.34 yen from 66.44. It fell to 55.06 euro cents from 55.34 cents yesterday, and edged up to 47.07 pence from 46.91 pence.

"The focus is going back to global risk appetite, with the main proxy being US equities," Speizer said. The Standard & Poor's 500 Index shed 0.5% overnight.

The kiwi dollar may trade between 7380 US cents and 74.20 cents today, with the currency on hold ahead of second-quarter GDP numbers and Fonterra's annual results, he said. The consensus range among local economists is for a GDP increase of between 0.5% and 0.8%.

Fonterra is expected to make another update on the pay-out to farmers. In August, Fonterra held its forecast at $6.60 per kilogram of milk solids.

"We're not expecting a major surprise, the numbers are largely known already," said Speizer.

"What is of interest will be if they discuss the current season, which will have an effect on the dollar."

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