NZ dollar little changed as US woes overshadow improving business confidence

Tuesday 8th October 2013

The New Zealand dollar was little changed as the stalemate among US legislators threatens to bring on a possible default by the world's biggest economy, overshadowing upbeat business confidence surveys on both sides of the Tasman.

The kiwi traded at 82.93 US cents at 5pm in Wellington from 83.30 cents at 8am and 82.85 cents yesterday. The trade-weighted index was almost unchanged at 76.89 from 76.86 yesterday.

The US House of Representatives is still gridlocked over the Federal government's budget, which has left the door open to a possible default on its debt if it fails to raise its ability to borrow by Oct. 17. That situation has left investors nervous about the current environment, and they largely ignored strong business confidence surveys in New Zealand and Australia.

"People are going to be waiting on tenterhooks until we get some resolution," said Michael Johnston, senior trader at HiFX in Auckland. "There's an increasing risk we could see a large risk-aversion type trade on fears the US is forced to default" and that could lead to "a sharp correction in the kiwi dollar in the next 10 days or so."

The kiwi dollar traded at 88 Australian cents from 87.95 cents yesterday after New Zealand business confidence rose to a 14-year high, according to the New Zealand Institute of Economic Research's quarterly survey of business opinion, and after the NAB confidence index climbed to a three-and-a-half year high.

HiFX's Johnston said local data "pales in significance compared to what's going on in the US."

The local currency traded at 80.37 yen from 80.48 yen yesterday, and was at 61.14 euro cents from 61.08 cents. It was little changed at 51.58 British pence from 51.67 pence yesterday.

BusinessDesk.co.nz

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