Kiwi falls as Bernanke shies off QE3, China data looms

BUSINESSDESK: The New Zealand dollar ended a five-day rally as US Federal Reserve chair Ben Bernanke shied away from hinting at injecting more stimulus into the world's biggest economy, sapping investors' confidence for riskier, or higher-yielding, assets.

The kiwi fell to 76.37 US cents at 5pm from 76.65 US cents at 8am and 77.05 cents yesterday. The trade-weighted index dropped to 69.64 from 70.07 yesterday.

The currency is poised for a 1.4% weekly gain against the greenback and a 1% increase on the TWI.

Stock markets across Asia fell as investors were disappointed by the Fed chairman's testimony to the House of Representatives' Joint Economic Committee yesterday.

Mr Bernanke said the central bank has options to ease monetary policy further, without specifically outlining any, a day after vice-chairman Janet Yellen said any more setbacks may warrant more accommodation in policy.

Japan's Nikkei 225 index fell 2% in afternoon trading, while Hong Kong's Hang Seng was down 0.4% and Australia's S&P/ASX 200 index declined 1.1%.

"I wouldn't be surprised if [Bernanke] got Yellen to telegraph a bit, and he played a straight bat as the main policy-maker," said Imre Speizer, market strategist at Westpac Banking.

"The kiwi has had a big move over the last five days, and it might give up some gains over two or three days, and then gets another week up."

Markets are waiting on a slew of Chinese data this weekend, including inflation and manufacturing figures, which are expected to indicate the world's second-biggest economy is slowing.

The People's Bank of China cut one-year lending rates a quarter-point to 6.31% and its one-year deposit rate to 3.25% today. The kiwi fell to 4.8653 yuan from 4.8814 yuan yesterday.

Mr Speizer said analysts expect weak figures, and with the Australian market closed on Monday that means New Zealand traders will be busy until Asia opens later that day.

"There's a bit more in [the kiwi's rally] but if we get a horrible bunch of data, markets will spoil the party," he said.

The International Monetary Fund today said New Zealand's dollar needs to be 15% weaker to be at a level that would sustain the nation's current account deficit at 2009 levels.

New Zealand's external vulnerability was cited as the nation's biggest medium-term issue, needing a better national savings rate and reduced reliance on overseas funding for banks.

The kiwi to fell to 77.36 Australian cents from 77.43 cents yesterday, and declined to 60.58 yen from 61.16 yen.

It decreased to 60.99 euro cents from 61.33 cents yesterday, and dropped to 49.30 pence from 49.81 pence.