Kiwi steady before German ruling on eurozone fund, Fed meeting

Germany's Federal Constitutional Court will rule on the nation's participation in 500 billion euro European Stability Mechanism.

BUSINESSDESK: The New Zealand dollar was little changed in local trading as investors await the German Constitutional Court judgment on the legality of the eurozone's rescue fund and Thursday's Federal Open Market Committee meeting which may result in more asset purchases.

The kiwi traded at 81 US cents at 5pm in Wellington from 80.83 cents at 8am and 81.16 cents yesterday. The trade-weighted index fell to 72.36 from 72.51 yesterday.

Germany's Federal Constitutional Court will rule on the nation's participation in 500 billion euro European Stability Mechanism, a fund set up to help eurozone member states lower their borrowing costs by providing cheap loans.

The fund is a central plank in the region's plans to prevent a full-blown sovereign debt crisis, with the so-called PIIGS (Portugal, Ireland, Italy, Greece and Spain) struggling to contend with ballooning interest costs.

That comes as investors prepare for the Federal Open Market Committee meeting this week, where chairman Ben Bernanke is expected to announce a third round of quantitative easing and push out the timeframe for near-zero interest rates to 2015.

The German ruling "could be a small risk overnight, but the big thing we'll be waiting for is Thursday's FOMC meeting," says Imre Speizer, market strategist at Westpac Banking Corp in Auckland.

"Markets are long on risk assets already leading into the meeting and we've already had the signal [for QE3], so we might not get a big initial reaction" in the kiwi," he said.

New Zealand's currency is hitting resistance at 81.70 US cents, and if that breaks higher, "then we'll get another big bull," Mr Speizer says.

Government figures showed New Zealanders ramped up their spending on credit and debit cards last month with a spike in petrol expenditure underscoring the gain.

Separately, New Zealand property values continued to improve in August and have almost clawed back all of their losses when the local housing bubble burst and the finance sector fell over.

The kiwi fell to 78.26 Australian cents from 78.35 cents yesterday and slipped to 63.35 yen from 63.50 yen. It was little changed at 63.42 euro cents from 63.50 cents and declined to 50.59 British pence from 50.73 pence.