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NZ dollar trades little changed as US budget talks bear down on deadline

Monday 31st December 2012

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The New Zealand dollar was little changed against the greenback as traders awaited developments on US budget talks, with the fiscal cliff deadline now just two days away.

The kiwi dollar traded at 81.94 US cents from 81.93 cents in New York on Friday. The trade-weighted index was at 73.53 from 73.55.

President Barack Obama told NBC's Meet the Press in an interview on Saturday that he was "modestly optimistic yesterday, but we don't yet see an agreement." Senate Democrats have rejected the Republican's latest offer on averting US$600 billion of tax hikes and spending cuts, Bloomberg reported, citing Senate Democratic aides close to the negotiations. Congress has until Monday midnight to reach an agreement.

The kiwi "is going to have more of an offered bias than a bid bias," said Tim Kelleher, head of institutional FX sales at ASB Institutional. The local currency will have "a slightly defensive tone" through until the end of the year though it has held up reasonably well given stocks on Wall Street sold off on Friday.

The New Zealand dollar may trade in a range of 81.75 US cents to 82.25 cents today, he said.

On Friday both the Dow Jones Industrial Average and the Standard & Poor's 500 Index fell more than 1 percent on speculation politicians in Washington would fail to reach agreement on averting the fiscal cliff, which risks pushing the US economy into recession.

Kelleher said traders will be watching for any headlines on progress today.

The kiwi dollar traded at 61.99 euro cents from 61.98 cents in New York on Friday. Figures over the weekend showed a big drop in euro shorts, suggesting the market is easing off on bets the common currency will fall further.

The kiwi traded at 50.67 British pence from 50.68 pence. It fell to 70.36 yen from 70.53 yen and traded at 79 Australian cents from 79.01 cents.

BusinessDesk.co.nz

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