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NZ dollar gains ahead of Bernanke speech, US retail sales, FOMC minutes loom

Wednesday 20th November 2013

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The New Zealand dollar gained ahead of a speech by outgoing Federal Reserve chairman Ben Bernanke, and as US data and minutes to the last Fed policy meeting loom.

The kiwi rose to 83.43 US cents at 8am in Wellington from 83.10 cents at 5pm yesterday. The trade-weighted index advanced to 77.79 from 77.55 yesterday.

Investors are awaiting Bernanke's speech on communications and monetary policy to the National Economic Club on Tuesday in Washington, where they will be looking for hints on when the Fed will start unwinding its US$85 billion monthly asset purchase programme. That comes ahead of the release of US consumer spending figures and the minutes to the Federal Open Market Committee's last policy meeting, which will also be used as a gauge as to when the Fed might start tapering stimulus.

"I'm not expecting much from Bernanke in the speech, if there was a surprise, it would probably be US dollar positive," said Sam Tuck, senior manager FX at ANZ New Zealand in Auckland. "Bernanke still presides over the December meeting, but there's a low probability of the Fed changing its policy - we're predicting no change before March."

ANZ's Tuck said the kiwi may trade between 83.10 US cents and 83.80 cents today.

The kiwi was little changed at 88.60 Australian cents at 8am in Wellington from 88.67 cents yesterday after minutes to the Reserve Bank of Australia's last policy meeting talked up the impact of the housing market on its assessment. Australia's central bank is seen as less likely to cut its key rate again for fear of fuelling the property market.

The Reserve Bank of New Zealand survey of inflation expectations yesterday showed the 82 New Zealand-wide firms polled expect interest rates to rise by around 60 basis points at the short end over the course of the next year. Expectations for inflation are stable, with an annual rate of 1.94 percent is expected in the September year, rising slightly to 2.34 percent in a year's time.

New Zealand figures today on producer price inflation will largely be ignored by the market barring a major surprise.

The kiwi edged up to 61.67 euro cents from 61.54 cents yesterday after European Central Bank board member Joerg Asmussen said the monetary authority hasn't exhausted its options to deal with low inflation and has to be careful when using negative interest rates.

The kiwi rose to 83.59 yen from 82.98 yen yesterday, and increased to 51.79 British pence from 51.62 pence.

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