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NZ dollar falls ahead of Fed minutes; RBNZ, emerging markets weigh

Wednesday 21st August 2013

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The New Zealand dollar fell in local trading before the Federal Reserve releases minutes to its latest policy meeting, and as steps by the Reserve Bank to curb home lending and weak emerging markets weigh on risk-sensitive assets.

The kiwi fell to 79.31 US cents at 5pm in Wellington from 79.87 cents at 8am, when it was unchanged from yesterday. The trade-weighted index dropped to 74.64 from 75.21 yesterday.

Investors are waiting for the US central bank to publish minutes to the Federal Open Market Committee's July meeting in the hopes of more guidance on plans to cut monetary stimulus in the world's biggest economy. Demand for the kiwi has been dimmed by the Reserve Bank of New Zealand's announcement yesterday to impose limits on low equity home lending, and as investors pare back holdings in emerging markets amid fears of weakening economies such as India and Indonesia.

"The kiwi's not helped" by Governor Graeme Wheeler yesterday announcing loan restrictions, said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. "That lowers the chance of a hike in the OCR."

The kiwi might edge down toward 79 US cents, with a 78.50 cents target and in the medium-term, "it's looking weak," he said.

The Reserve Bank of India yesterday announced plans to buy 80 billion rupees of long-dated government bonds on Aug. 23, kicking off an asset-purchase scheme to help fuel the economy, while Indonesia's biggest pension fund, PT Jamsostek, will start upping its exposure to the country's biggest stocks to stabilise financial markets.

The kiwi bought 50.199 Indian rupees at 5pm in Wellington from 50.843 rupees yesterday and traded at 8529.05 Indonesian rupiahs from 8526.06 rupiahs.

The local currency fell to 77.30 yen from 77.91 yen yesterday after Japan's currency dropped amid heightened concerns over nuclear radiation leakage at Tokyo Electric Power's Fukushima plant.

The kiwi declined to 87.78 Australian cents from 88.08 cents yesterday, and fell to 59.10 euro cents from 59.83 cents. It declined to 50.64 British pence from 51.04 pence.

BusinessDesk.co.nz

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