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NZ dollar falls as Boehner bursts optimism over fiscal cliff

Friday 30th November 2012

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The New Zealand dollar fell after US House of Representatives Speaker and senior Republican John Boehner dashed optimism politicians were getting closer to avoiding the fiscal cliff.

The kiwi fell to 82.24 US cents at 8am in Wellington from 82.41 cents yesterday. The trade-weighted index declined to 73.58 from 73.74 yesterday.

Investors eschewed risk-sensitive currencies such as the kiwi and Australian dollars after Boehner said US President Barack Obama has to get "serious" about spending cuts and that "there is a real danger of going off the fiscal cliff." Boehner made the comments after speaking with Obama and Treasury Secretary Timothy Geithner over ways to avert the automatic US$607 billion in tax increases and spending cuts which kick in on Jan. 1.

"Investors were checking their optimism following the Boehner comments," said Mike Jones, currency strategist at Bank of New Zealand in Wellington. "That downbeat sentiment was reflected in the kiwi and Aussie."

The currency may trade between 82.10 US cents and 82.60 cents today, with investors looking at tomorrow's Chinese manufacturing figures, Jones said.

Recent Chinese data has painted an upbeat picture about industrial production in the world's second-biggest economy, and if that continues, the kiwi and Australian dollars may gain on Monday, he said.

The New Zealand dollar was little changed at 78.81 Australian cents from 78.75 cents yesterday as central banks on both sides of the Tasman prepare to review monetary policy next week.

Traders are pricing a 77 percent chance the 3.25 percent target cash rate will be trimmed, according to the Overnight Index Swap curve. New Zealand's central bank, which also meets next week, is being given a 14 percent chance of a cut to its 2.5 percent official cash rate, meaning Australia's yield advantage will probably narrow.

The currency slipped to 67.54 yen from 67.65 yen yesterday, and declined to 51.27 British pence from 51.45 pence. It fell to 63.38 euro cents from 63.63 cents yesterday.

BusinessDesk.co.nz

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