Kiwi slips against euro after Draghi says ECB ready to buy bonds

(BusinessDesk) The New Zealand dollar fell against the euro after European Central Bank president Mario Draghi said the bank was ready to buy bonds of eurozone members, leaving the door open to bail out Spain.

The kiwi fell to 63.08 euro cents at 8am from 63.47 cents and was little changed on 82.14 US cents from 82.06 cents. The trade weighted index decreased to 73.18 from 73.55.

The local currency fell against the euro after the ECB and the Bank of England left interest rates unchanged and Mr Draghi used the press conference to reiterate the central bank's soft macro outlook. He says the shared currency is irreversible and the bank's decision to buy bonds would help ease tensions.

Equity market on both sides of the Atlantic rallied after the announcement, with the Dow Jones Industrial Average climbing 0.6% and Germany's DAX up 0.3%.

"All the focus is on what Draghi said – it was seen as a positive by markets," says Stuart Ive, currency strategist at HiFX. "It looks as if the kiwi has made its lows for the time being with a good rally for the euro following the ECB's comments."

The kiwi is likely to trade in a range of 63.35 euro cents and 62.80 cents on the day, he says.

The New Zealand dollar was little changed against the US dollar after minutes from the Federal Reserve Open Market Committee said the central bank could change the size of its monthly bond purchases to reduce risks associated with quantitative easing such as market disruption or rising inflation.

In September, Fed chairman Ben Bernanke announced the central bank would expand its holdings of long-term securities with open-ended purchases of $US40 billion of mortgage debt a month.

US Labor Department data showed applications for jobless benefits increased 4000 to 367,000 in the week ended September 29. A Bloomberg survey had forecast 370,000 claims.

That comes ahead of non-farm payrolls overnight which is expected to show employers hired 115,000 workers in September, more than the month prior, while the jobless rate rose to 8.2% from 8.1%.

Markets in the US will be closed on Monday for Columbus Day.

There is no more significant data here set for release until Tuesday's New Zealand Institute of Economic Research's business survey.

The kiwi fell to 50.74 British pence from 50.95 pence and dropped to 64.45 yen from 64.55 yen. It rose to 80.51 Australian cents from 80.33 cents.