Kiwi pares loss as US election raises questions for Fed
BUSINESSDESK: The New Zealand dollar pared its loss from Friday when strong US jobs figures stoked demand for the greenback, with the possibility of a new American president raising question marks over the Federal Reserve's monetary policy under a new administration.
The kiwi rose to 81.77 US cents at 5pm in Wellington from 81.60 cents at 8am and almost unchanged from 81.76 cents on Friday in New York. The trade-weighted index edged up to 73.06 from 72.89 last week.
Risk-sensitive currencies, such as the kiwi, sank on Friday after the US unexpectedly reduced its unemployment rate to 7.8% last month, the latest in a string of upbeat data emanating from the world's biggest economy.
The momentum of the economy and strong showing by Republican nominee Mitt Romney in the first presidential debate has some traders contemplating the Fed's future monetary policy if there is a change in the White House.
Markets are pricing in the Fed lifting the Federal Funds Rate 16 basis points from its current zero to 0.25% range in the coming year, according to the Overnight Index Swap curve. The yield on US 10-year Treasuries rose 7 basis points to 1.743% on Friday.
If Mr Romney wins and a new Fed chairman is appointed, "people are saying maybe US rates won't stay as low as they think", says Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland.
"The kiwi had a very weak close on Friday, which should permeate through the first two or three days this week."
Mr Kelleher says the kiwi probably will not drift too far in the Northern Hemisphere trading session, with US markets closed for Columbus Day.
The local unit is expected to fall against the greenback this week on the strength of US economic growth, according to a BusinessDesk survey of five strategists, and is expected to gain against its Australian counterpart, with weak employment figures flagged for Thursday.
Australia has had to contend with a slowdown in its resources sector, an industry that's offset weakness in the rest of the economy in recent years.
The kiwi rose to 80.47 Australian cents from 80.18 cents last week.
Trading today took place against a backdrop of growing calls from Opposition parties for changes to the Reserve Bank of New Zealand's sole monetary policy focus on inflation, with the Green Party proposing quantitative easing to stimulate economic growth.
New Zealand house sales volumes and median property prices rose last month as strong demand in Auckland wasn't met by an equivalent supply, Real Estate Institute figures show.
That comes ahead of government property value figures tomorrow, and the New Zealand Institute of Economic Research's quarterly survey of business opinion.
The kiwi edged down to 64.21 yen from 64.30 yen on Friday in New York and rose to 62.94 euro cents from 62.72 cents. It increased to 50.74 British pence from 50.66 pence.