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Dollar heads for 1.3% weekly gain vs greenback after Fed warning

Paul McBeth
Fri, 10 Oct 2014

The New Zealand dollar is heading for a 1.3 percent weekly gain against the greenback after the Federal Reserve warned a stronger US currency poses a risk to its economic recovery.

The kiwi traded at 78.61 US cents at 5pm in Wellington from 77.62 cents on Friday in New York last week. It traded at 78.53 cents at 8am and 79.40 cents yesterday. The trade-weighted index was at 76.48 from 76.96 yesterday, and is heading for a 0.3 percent weekly decline from 76.68 at last week's close.

The greenback stumbled this week after minutes to the Federal Open Market Committee's September policy review showed officials at the world's biggest central bank were concerned a global slowdown and a stronger currency posed risks for the US economy. The greenback has been on an upward trajectory since the end of June as traders firmed up their bets the Fed will start raising interest rates next year, ending a zero-interest rate policy that has been in place since the global financial crisis.

"The greenback has previously been one-way traffic in recent weeks, but now it's going to be more whippy and range-y with two-way reactions," said Michael Johnston, senior trader at HiFX in Auckland. "I think that's helped clear the way for further downside" in the kiwi, though it will likely be more gradual, he said.

The greenback recovered from yesterday's surprise Fed view after European Central Bank president Mario Draghi pledged policy makers will take steps to stoke inflation to ensure price stability. German data showed Europe's biggest economy had its biggest monthly fall in exports in August since the 2009 recession.

Traders will be keeping an eye out for news from the Group of 20 nations' meeting of finance ministers in Australia, the escalating Ebola situation and the annual meetings of the International Monetary Fund and World Bank.

The local currency fell to 61.91 euro cents at 5pm in Wellington from 62.30 cents yesterday, and declined to 48.77 British pence from 49.05 pence. It dropped to 84.76 yen from 85.68 yen, and gained to 89.64 Australian cents from 89.47 cents yesterday.


Paul McBeth
Fri, 10 Oct 2014
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Dollar heads for 1.3% weekly gain vs greenback after Fed warning