Kiwi falls as investors consider impact of Fed's QE3

BUSINESSDESK: The New Zealand dollar fell against the greenback as investors pause to consider the impact of the Federal Reserve's latest quantitative easing programme, pushing stock markets and other risk-sensitive assets lower.

The kiwi slipped to 82.57 US cents at 8am from 82.74 US cents at 5pm yesterday. The trade weighted index was little changed at 73.02 from 73.08.

Equity markets on both sides of the Atlantic extended this week's decline, with Wall Street's Standard & Poor's 500 Index falling 0.5% and France's CAC 40 index down 0.5%.

Investors are speculating more needs to be done to help fix the world's largest economy, after Fed chairman Ben Bernanke announced the central bank would expand its holdings of long-term securities with open-ended purchases of $US40 billion of mortgage debt a month.

"People are just reassessing the idea that QE3 will save the world," says Mike Jones, currency strategist at Bank of New Zealand. "We are seeing more profit taking than anything else. The New Zealand dollar is just settling in before another run higher."

US manufacturing figures added to the glum mood, falling to its lowest level since April 2009. The New York Empire Manufacturing survey deteriorated to minus 10.41 in September, down from minus 5.85 in August. Economists had been expecting minus 2.

The kiwi rose to 78.84 Australian cents from 78.63 cents yesterday ahead of the release of minutes to this month's Reserve Bank of Australia meeting. Australia's central bank left its official cash rate unchanged at 3.5%.

"The minutes will be pored over for a view on the RBA's opinion over the international backdrop which is deteriorating," Mr Jones says. "The risk going into the minutes is for a bit of a relief rally for the Aussie and the kiwi."

New Zealand's outgoing central bank governor Alan Bollard kept the official cash rate at 2.5% last week, saying the weak outlook for the country's trading partners threatens economic growth and the strong kiwi dollar is hurting exporters and local manufacturers.

There is no significant New Zealand data set for release today.

The kiwi was little changed at 63 euro cents at 8am from 63.01 cents yesterday and slipped to 50.79 British pence from 51.01 pence. It rose to 65.01 yen from 64.81 yen.

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NZ Market Snapshot

Forex

Sym Price Change
USD 0.7895 0.0011 0.14%
AUD 0.9090 0.0006 0.07%
EUR 0.6372 -0.0003 -0.05%
GBP 0.5044 0.0002 0.04%
HKD 6.1234 0.0037 0.06%
JPY 93.1020 0.2160 0.23%

Commods

Commodity Price Change Time
Gold Index 1201.1 7.690 2014-11-21T00:
Oil Brent 78.6 -0.120 2014-11-21T00:
Oil Nymex 76.5 0.710 2014-11-21T00:
Silver Index 16.4 0.260 2014-11-21T00:

Indices

Symbol Open High Last %
NZX 50 5526.9 5526.9 5526.9 -0.56%
NASDAQ 4751.0 4751.6 4701.9 0.24%
DAX 9521.2 9736.1 9484.0 2.62%
DJI 17721.0 17894.8 17719.0 0.51%
FTSE 6678.9 6773.1 6678.9 1.08%
HKSE 23883.3 23936.3 23437.1 1.87%
NI225 17285.7 17381.6 17300.9 0.33%