Kiwi dips below 79 US cents as investors turn back on South Pacific

The New Zealand dollar touched below 79 US cents for the first time since July last year as investors continued to spurn the transTasman currencies, with US employment figures on Friday set to firm up views on whether the Federal Reserve will start winding back its money printing programme.

The kiwi fell as low as 78.99 cents, trading at 79.09 US cents at 5pm in Wellington from 80.03 cents at 8am and 79.48 cents yesterday. The trade-weighted index sank to 74.41 from 75.45 yesterday.

Investors have continued to rally behind the greenback on the growing expectation the Fed will start unwinding its $US85 billion a month bond buying programme.

Non-farm payrolls on Friday in Washington is seen as a barometer of the central bank's appetite for tapering off the scheme, with chairman Ben Bernanke linking a drop in the jobless rate to tighter monetary policy. A Bloomberg survey of economists are picking 167,000 jobs were added to the world's biggest economy last month.

"If we get a strong non-farm payrolls all eyes will be on the Fed," says Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. "The Fed Funds rate is not going to move, and if they taper the bond buying, there's still the yield advantage" for the kiwi.

He says the kiwi has support at 78.50 US cents and will probably follow its Australian counterpart lower, though at a slower pace.

The Australian dollar fell to 94.46 US cents from 96.40 cents yesterday after government figures showed a smaller-than-expected trade surplus in April, a day after official data showed slower growth than economists were anticipating. The kiwi gained to 83.71 Australian cents from 83.41 cents yesterday.

The European Central Bank and Bank of England review monetary policy overnight and are both expected to keep their benchmark rates unchanged. The kiwi dropped to 60.31 euro cents from 61.46 cents yesterday and declined to 51.33 British pence from 52.50 pence.

It fell to 78.40 yen from 80.21 yen yesterday.

(BusinessDesk)