Kiwi slips as Fed holds fire on tapering, hits new high against AUD

The New Zealand dollar slipped after the Federal Reserve stayed mum on plans to withdraw stimulus later this year, while hitting a new five-year high against the Australian dollar as the transTasman economies keep diverging.

The kiwi fell to 79.65 US cents at 5pm in Wellington from 79.85 cents at 8am and 79.77 cents yesterday. It rose as high as 89.05 Australian cents, trading at 88.85 cents at 5pm from 88.30 cents yesterday.

Fed chairman Ben Bernanke did not offer any hints on plans to taper the central bank's $US85 billion monthly bond purchases, saying the regulator is still watching the data. That came after official figures showed the world's biggest economy grew at a 1.7 percent annual pace in the second quarter, faster than what analysts were expecting.

The next major US data will be unemployment figures on Friday in Washington.

"There was never going to be a big song and dance today. The big announcement, if any, will be at the September meeting" which includes the Fed's forecasts, says Imre Speizer, market strategist at Westpac Banking Corp in Auckland.

"I still fancy the kiwi falling over the next few months into the low 70s and this payrolls number and the next will tell if I'm wrong or not."

The kiwi continued to hold near a five-year high against its transTasman counterpart as the slowing Australian economy and recovering New Zealand one put their interest rate tracks on different paths.

Traders are pricing in 56 basis points of cuts in Australia and 71 basis points of hikes in New Zealand over the next 12 months, according to the Overnight Index Swap curve.

Mr Speizer says the kiwi is about fair value against its Australian counterpart, though it is starting to look overstretched.

The European Central Bank and Bank of England will review their respective monetary policies during the Northern Hemisphere trading session and investors will be looking for updates on the state of their economies.

The kiwi fell to 59.98 euro cents at 5pm in Wellington from 60.16 cents yesterday and increased to 52.52 British pence from 52.40 pence.

It traded at 78.35 yen from 78.20 yen yesterday, and was 75.54 on the trade-weighted index from 75.49.

(BusinessDesk)