Kiwi poised for 0.5% weekly fall on new QE3 doubts
BUSINESSDESK: The New Zealand dollar is poised for a 0.5% weekly decline as signs off life in the US economy have taken the gloss of expectations for a third round of money printing by the Federal Reserve.
The kiwi traded at 80.91 US cents at 5pm in Wellington from 80.97 cents at 8am and 80.59 cents yesterday. The trade-weighted index rose to 72.99 from 72.81, and is poised for a 0.1% weekly gain.
The currency pared its weekly drop after Germany Chancellor Angela Merkel publicly backed the European Central Bank buying Spanish government bonds as a means to stave off a regional debt crisis, stoking investors' appetite for risk-sensitive assets.
That had been derailed by a string of better-than-expected US figures, including upbeat housing data, which has sapped expectations the Fed will embark on a third round of asset purchases to reinvigorate the world's biggest economy.
"Things are gathering pace in preparation that the Fed won't be firing up the printing presses in September," says Mike Jones, currency strategist at Bank of New Zealand in Wellington. "The trend for the kiwi is to keep at the bottom end of its range" between 80 US cents to 82.30 cents.
Traders are reluctant to change their bets until the central bankers' summit at Jackson Hole, Wyoming, on August 31 and the European Central Bank meeting in September, he says.
"Markets are very sleepy and volumes low as we wait for some of the big event risks at the end of August and in early September."
New Zealand input and output producer prices rose at respective paces of 0.6% and 0.3% in the June quarter as low hydro lake levels lifted gas and electricity costs in the period.
The kiwi fell to 65.55 euro cents from 65.85 cent yesterday and increased to 51.54 British pence from 51.43 pence. It gained to 77.29 Australian cents from 76.86 cents and advanced to 64.18 yen from 63.91 yen.