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NZ dollar little changed as investors await Fed meeting

The New Zealand dollar was little changed in local trading as investors await the outcome of the Federal Reserve's latest policy meeting, amid speculation the US central bank will announce a winding back of its massive money printing programme.

The kiwi traded at 82.52 US cents at 5pm in Wellington from 82.61 cents at 8am, down from 82.80 cents yesterday. The trade-weighted index declined to 77.79 from 77.99 yesterday.

About a third of the market expects the Federal Open Market Committee will announce a small cut in the US$85 billion monthly bond buying scheme at the end of their meeting on Tuesday in Washington. Improving economic data in the US has built up expectations for a scaling back of the quantitative easing, though traders have previously been disappointed when the Fed didn't go ahead with the cuts in September.

"Clearly, it's very finely balanced on which way they're going to go," said Stuart Ive, senior client adviser at OM Financial in Wellington. "If the Fed does nothing we could see the kiwi spike higher on the back of that."

Once the Fed meeting is over, investors will be looking to New Zealand's third-quarter gross domestic product figures, which are expected to show quarterly growth of 1.1 percent.

OM's Ive said if the Fed doesn't unwind its bond buying programme, he doesn't expect the kiwi to fall too far because of the momentum in the local economy.

An ANZ Bank survey today showed business confidence at a 15-year high, and more than half of the firms surveyed see their own activity picking up in the next year.

The local currency was little changed at 92.62 Australian cents from 92.60 cents yesterday after Reserve Bank of Australia governor Glenn Stevens told politicians the monetary authority is still open to rate cuts if they're needed, but would prefer a weaker currency to balance out a slowing economy.

The kiwi fell to 84.98 yen from 85.24 yen yesterday, ahead of the Bank of Japan's policy review. The local currency dropped to 59.90 euro cents from 60.14 cents yesterday, and slipped to 50.65 British pence from 50.78 pence.

(BusinessDesk)