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Kiwi falls with stocks on doubts Fed minutes will signal QE3

BUSINESSDESK: The New Zealand dollar fell in the local trading session as stocks across Asia declined amid speculation the Federal Open Market Committee's latest meeting minutes won't talk up the prospects of more asset purchases.

The kiwi fell to 80.84 US cents at 5pm in Wellington from 81.04 cents at 8am and 81.06 cents yesterday. The trade-weighted index declined to 72.73 from 73.06.

Equity markets across Asia-Pacific followed Wall Street lower, with Japan's Nikkei 225 index down 0.3%, Hong Kong's Hang Seng dropping 0.9% and Australia's S&P/ASX 200 index down 0.2% in afternoon trading.

That comes as traders prepare for the Fed to publish the minutes of this month's meeting early tomorrow in Washington, with dwindling expectations the central bank will mention a third round of quantitative easing.

"There's no chance of QE3 being mentioned and with housing markets improved there's a risk it's going to be slightly more hawkish," says Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland.

"We should see the currency continue to drift off, but it should hold above 80 US cents."

Recent signs of improvement in the US economy have eroded expectations the Fed will pump more stimulus into the world's biggest economy.

Markets are waiting for the August 31 central bank summit at Jackson Hole, Wyoming, for more guidance on the Fed chairman Ben Bernanke's assessment of US growth.

European leaders will meet on Friday to discuss Greece's multi-billion euro rescue package, and traders will keep tabs on the Mediterranean nation's finances amid growing speculation the European Central Bank will embark on a bond-buying programme of Spanish and Italian government debt to soothe the region's debt woes.

The kiwi fell to 64.86 euro cents from 65.58 cents yesterday and was little changed at 77.30 Australian cents from 77.28 cents. It dropped to 51.21 British pence from 51.53 pence and declined to 64.09 yen from 64.28 yen.