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NZ dollar falls as upbeat US data damps expectation for Fed injection

Monday 12th March 2012

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The New Zealand dollar fell as better-than-expected US data dimmed the chance of more monetary stimulus from the Federal Reserve, and sapped demand for the kiwi.

The New Zealand dollar fell to 82 US cents at 8am this morning in Wellington from 82.54 cents on Friday at 5pm and was little-changed from 82.10 cents at the close of trading in New York.

Positive US data boosted investor confidence that the world’s largest economy is on track to recover amid signs of growth in the labour market, reducing demand for risk-sensitive assets such as the kiwi dollar. That damped the likelihood of the Fed printing money for a third time, a move that would further devalue the greenback and push the kiwi higher.

The Dollar Index, a measure of the greenback against a basket of six currencies, climbed 0.7 percent to 79.96 on Friday, holding near a two-month high.

“It would be unlikely the US would go to further quantitative easing and that is really why the New Zealand dollar headed lower,” said Stu Ive, currency strategist at HiFX.

US nonfarm payrolls increased by 227,000 in February after rising by a revised 284,000 the prior month, according to figures from the Labor Department showed today. The unemployment rate held at a three-year low of 8.3 percent.

Investors will be eyeing a statement from the Federal Open Market Committee, following its meeting on Tuesday for further market direction.

“We may see some moves to the downside but this will be dictated by what Bernanke says on Wednesday morning,” Ive said. “My initial thought is that the kiwi still retains around the 82.70 area. It may struggle to go higher than that.”

China, New Zealand’s second largest trading partner, posted its biggest trade deficit for February in at least 22 years, a week after the world’s second biggest economy downgraded its growth forecast. The shortfall was US$31.5 billion, according to the customs bureau. Imports rose 40 percent from a year earlier, after a 15 percent slump in January, while exports increased 18 percent, the bureau said.

“China could be swinging from an exporting nation to a consumer nation,” Ive said. “That would be bearish for commodity currencies like the New Zealand and Australian dollar,” as it spends less on importing raw materials from primary producing nations such as Australia and New Zealand, he said.

The Greek government announced 85 percent of private bondholders had agreed to its bond swap, comfortably above the 75 percent participation threshold required to receive its second-bailout. It still has to get final approval at a euro-zone finance minister meeting in Brussels this week. The International Monetary Fund is expected to indicate its participation on March 15.

New Zealand’s accommodation survey for January is set for release today.

The New Zealand dollar fell to 77.56 Australian cents from 77.62 cents at the close of trading in New York. It declined to 52.30 British pence from 52.37 pence and was down to 62.52 euro cents from 62.55 cents.

It was little-changed on 67.63 yen from 67.66 yen.

The trade-weighted index rose was little-changed on 73.12 from 73.10.

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