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NZ dollar slips from four-month high as investors prepare for Fed tapering

Wednesday 18th September 2013

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The New Zealand dollar fell from a four-month high in local trading as investors ready themselves for a presumed start to the Federal Reserve's tapering of its money printing programme.

The kiwi was little changed at 82.27 US cents at 5pm in Wellington from 82.37 cents at 8am, and up from 81.66 cents yesterday. The trade-weighted index rose to 77.01 from 76.58 yesterday.

Investors are expected Fed chairman Ben Bernanke to announce the first slowdown in the central bank's US$85 billion monthly bond buying programme at the end of a two-day meeting in Washington on Wednesday. A Bloomberg survey of economists predicts the Federal Open Market Committee will trim monthly purchases by between US$5 billion and $40 billion. The monetary stimulus has been devaluing the greenback by effectively creating negative interest rates in the US.

"It goes without saying tomorrow is the big event that we've been looking out for," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "If the tapering is greater than US$20 billion and they're fairly bullish about the future, that would push the kiwi lower."

Speizer said Westpac is expecting about US$10 billion of tapering, which is fully-priced into the kiwi dollar, allowing it to keep pressing higher over the next couple of weeks on the strength of the local economy.

Government figures tomorrow are expected to show New Zealand's economy grew 0.1 percent in the second quarter, according to a Reuters survey of economists. There's a risk the quarter may show a contraction in the economy as the effects of the drought come to bear, and the local economic teams are more downbeat about the report than their international counterparts.

New Zealand's current account showed a smaller than expected deficit of $1.25 billion in the three months ended June 30. Seasonally adjusted, the shortfall was $2.2 billion, with the drought weighing on primary sector exports.

The New Zealand dollar rose to 87.97 Australian cents at 5pm in Wellington from 87.77 cents yesterday and increased to 81.55 yen from 81 yen. The local currency advanced to 61.56 euro cents from 61.23 cents yesterday and gained to 51.69 British pence from 51.36 pence.

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