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NZ dollar little changed ahead of key US employment data; Fed tapering in focus

Friday 6th September 2013

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The New Zealand dollar is little changed ahead of a key US employment report tonight where strong data is expected to signal that the Federal Reserve will start to taper its bond buying stimulus programme this month.

The kiwi was at 78.88 US cents at 8am in Wellington from 78.95 cents at 5pm yesterday. The trade weighted index edged up to 74.80 from 74.68 yesterday.

Investors are awaiting US non-farm payroll data tonight which is expected to show the world's largest economy added 180,000 jobs in August as the unemployment rate held steady at 7.4 percent. Reports overnight showing a 176,000 gain in the ADP measure of employment and a rise in the ISM Services measure of employment from 53.2 to 57, suggesting tonight's report may beat expectations.

"The markets will focus on US payrolls tonight with expectations heightened for a good result," David Croy, head of markets research at ANZ New Zealand, said in a note. "Any disappointment would see the US dollar sold heavily."

The New Zealand dollar will probably trade between 78.40 US cents and 79.40 cents, Croy said.

The strength of tonight's data will signal whether the Fed is likely to pull back on its US$85 billion a month bond buying programme when officials meet Sept. 17-18.

ANZ expects the Fed to trim back its bond buying by US$10 billion at this month's meeting, Croy said. Still, the quantitative easing programme will continue to stimulate the US economy and any interest rate hikes in the US are at least a couple of years away, he said.

The New Zealand dollar advanced to 86.40 Australian cents at 8am in Wellington from 86.13 cents yesterday ahead of an Australian federal election this weekend.

The local currency edged up to 78.99 yen from 78.85 yen after the Bank of Japan kept monetary policy unchanged yesterday and reiterated a determination to do whatever is necessary to fuel inflation.

The kiwi rose to 60.14 euro cents from 59.86 cents yesterday after European Central Bank head Mario Draghi kept its main interest rate unchanged at a record low 0.5 percent and reiterated that the bank was ready to cut interest rates or pump more money into the economy to bolster a recovery.

Meanwhile the New Zealand dollar was little changed at 50.61 British pence from 50.57 pence yesterday after the Bank of England kept monetary policy unchanged.

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