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NZ dollar gains on weak US manufacturing, tepid inflation

Thursday 16th August 2012

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The New Zealand dollar rose for the first time in a week after weak US manufacturing and tepid inflation figures stoked speculation the Federal Reserve will unveil plans for a third round of asset purchases at the central bankers' summit in Jackson Hole, Wyoming this month.

The kiwi rose to 80.68 US cents from 80.51 cents at 5pm in Wellington yesterday. The trade-weighted index advanced to 72.75 from 72.56 yesterday.

Wall Street's Standard & Poor's 500 Index rose 0.1 percent after Empire State manufacturing shrank against expectations of growth, and figures showed zero inflation in July. That resurrected expectations the Fed will announce a third round of quantitative easing at the Jackson Hole summit, which would continue to keep pressure on the strength of the US dollar as the Fed prints more money.

"Weak US data gave equities a nudge higher" which lifted the kiwi, said Imre Speizer, market strategist at Westpac Banking in Auckland. "Weaker US data is good for the prospects of QE3."

Speizer said the currency may trade between 80.40 US cents and 81.30 cents today, as it squeezes higher and snaps a seven-day decline.

Prices of dairy products at Fonterra Cooperative Group's online auction platform rose a trade-weighted 7.8 percent, paced by whole and skim milk powder. Dairy prices are bouncing back from a three-year slump after a stellar local season.

With droughts across the US, Europe and India holding back supply, Speizer said prices could extend recent gains and may become more important for the kiwi dollar if global investor sentiment improves after Jackson Hole and the next European Central Bank meeting.

The kiwi gained to 63.64 yen from 63.40 yen yesterday, and was little changed at 76.79 Australian cents from 76.82 cents. It advanced to 65.67 euro cents from 65.29 cents yesterday, and edged up to 51.42 pence from 51.37 pence.

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