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NZ dollar gains after weaker US jobs data raises doubts over Fed tapering

Monday 9th September 2013

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The New Zealand dollar rose after weaker US jobs data prompted some investors to pull back expectations for the Federal Reserve to start tapering its bond buying programme this month.

The kiwi advanced to 80.09 US cents at 8am in Wellington from 79.96 cents at the New York close last week and 79.09 cents at 5pm in Wellington Friday. The trade-weighted index gained to 75.69 from 74.96 in Wellington Friday.

The US dollar index, which measures the greenback against a basket of currencies, slipped after a key US labour indicator on Friday printed weaker than expected and the previous two months of data were revised lower. That prompted some investors to pare back expectations for the Fed to start tapering its US$85 billion a month in bond buying, which has seen funds flow from emerging market economies.

"There might be a slight pricing out of an early tapering," said Kevin Morgan, senior dealer at OM Financial "I'm not sure that I would necessarily agree with that. I think the kiwi has rebounded after the pressure that we have seen from the emerging market story."

The Fed is expected to announce a start to tapering at its Sept. 17-18 meeting, in line with its plans to end the programme in mid-2014.

"They have been very specific about the timetable, that they want zero additional asset purchases by the middle of next year," said OM Financial's Morgan. "At the moment there is US$85 billion a month so you have got to wind down by about US$10 billion a month even if they start now. I would expect US$10-$15 billion a month being announced in September."

Fed San Francisco president John Williams, considered a dove, is the last Fed official scheduled to speak tonight, ahead of a blackout period leading into the central bank's next meeting, Westpac Banking Corp market strategist Imre Speizer said in a note.

Traders are eyeing potential western military action in Syria as US Secretary of State John Kerry tries to muster support for US action ahead of an expected vote in Congress this week.

Kerry, speaking after a meeting with Arab foreign ministers, said Saudi Arabia backs a strike and others will soon declare their support. Still, Russian president Vladimir Putin has said Russia will maintain its long-standing military and economic support for the Syrian president.

OM Financial's Morgan said he believes a strike on Syria "is not imminent."

In New Zealand today, reports are due on second quarter manufacturing and house values.

The New Zealand dollar rose to 86.92 Australian cents at 8am in Wellington from 86.61 cents at 5pm on Friday after Australia's Liberal-National Party coalition ousted the Labor Party at the weekend's Federal election.

The Aussie is trading above the key 92 US cent level and may bounce as high as 95 US cents before declining, said OM Financial's Morgan.

The kiwi advanced to 79.79 yen from 78.96 yen on Friday ahead of reports on second quarter growth and balance of payments today and as a decision looms on increasing consumption tax next year.

"The yen is going to continue to remain weak," said OM Financial's Morgan. "If you start to see any strength in the yen, the Bank of Japan and the Japanese government will take action to make sure that is only a limited and a temporary effect."

The local currency rose to 60.81 euro cents from 60.25 cents and gained to 51.22 British pence from 50.67 pence.

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