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NZ dollar drifts off ahead of US data, Fed minutes

Tuesday 19th November 2013

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The New Zealand dollar fell in local trading as investors await consumer spending and inflation figures in the US later this week, and the release of minutes to the Federal Reserve's last policy meeting.

The kiwi fell to 83.10 US cents at 5pm in Wellington from 83.57 cents at 8am and 83.50 cents yesterday. The trade-weighted index declined to 77.55 from 77.91 yesterday.

Investors are awaiting more US data and the release of minutes to the October Federal Open Market Committee meeting on Wednesday in Washington as they try to glean an insight into the central bank's thinking on winding back its US$85 billion monthly asset purchases. New York Fed President William Dudley kept traders uncertain when he said yesterday he's optimistic about growth in the next two years, though that was still a forecast rather than reality.

"Everything depends on US data. I'm bullish for a US dollar rally come the end of the week," said Martin Rudings, senior adviser at OM Financial in Wellington. "I see the kiwi a lot lower next year after tapering starts."

The Reserve Bank quarterly Survey of Inflation Expectations, published today, sees the kiwi about 2 US cents below current levels by September 2014.

OM Financial's Rudings said the local currency may trade between 82 US cents and 84 cents in the short-term.

The RBNZ survey shows 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.

The kiwi fell to 88.67 Australian cents at 5pm in Wellington from 88.82 cents yesterday after the minutes to the Reserve Bank of Australia's last policy meeting were released. The RBA board said the key rate didn't need to be lowered in November while it gauged the effects of previous cuts, though complained about the uncomfortably high Australian dollar.

The local currency dropped to 82.98 yen at 5pm in Wellington from 83.60 yen yesterday, and declined to 61.54 euro cents from 61.86 cents. It fell to 51.62 British pence from 51.76 pence yesterday.

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