Kiwi heads for small weekly gain amid growing prospects for QE3
BUSINESSDESK: The New Zealand dollar headed for a 0.6% weekly gain after minutes from this month's meeting of Federal Reserve policy makers stoked expectations for more asset purchases, even as global growth prospects took a dent with slower Chinese manufacturing.
The kiwi was little changed at 81.25 US cents at 5pm in Wellington from 81.28 cents at 8am and down from 81.67 cents yesterday. The trade-weighted index fell to 72.86 from 73.15 as it inched lower on the week.
Investors took heart from the minutes of the Federal Open Market Committee's latest meeting, which showed wide support for a third round of quantitative easing, though Federal Bank of St Louis president James Bullard took the sheen off that optimism, saying the world's biggest economy has picked up pace since then.
Stocks across the Asia Pacific followed their New York and European counterparts lower, with Japan's Nikkei 225 index down 1.3% in afternoon trading, Hong Kong's Hang Seng slid 1.1% and Australia's S&P/ASX 200 index dropping 0.9%.
"Global stock markets are still holding on to the potential for QE, and if we don't get it confirmed in September there's more likelihood for a global sell-off," says Dan Bell, currency strategist at HiFX in Auckland.
"The New Zealand dollar will struggle over the next month or so if there's disappointment about QE."
Weak Chinese manufacturing figures yesterday weighed on investors' appetite for risk. Mr Bell says he expects the world's second-biggest economy to keep reporting patchy data, which will sap investor optimism.
The central bank summit in Jackson Hole, Wyoming, next Friday is the next major event risk as traders monitor whether or not the Fed will start printing more money.
French and German leaders meet their Greek counterpart on Friday in Europe as the region's financial leaders prepare to monitor the Mediterranean nation's ability to meet the terms of its 130 billion euro bailout.
The kiwi fell to 64.70 euro cents from 65.14 cents yesterday.
The kiwi rose near two-month high 77.87 Australian cents from 77.69 cents yesterday after Reserve Bank of Australia governor Glenn Stevens told policymakers the Australian dollar will probably fall if the mining boom ends, in the face of deteriorating iron ore prices.
The New Zealand dollar fell to 63.81 yen from 64.14 yen yesterday and dropped to 51.23 British pence from 51.41 pence.