Kiwi steady after Fed tapering slices 3.7% from currency

The New Zealand dollar was little changed in local trading, having shed 3.7 percent since Federal Reserve chairman Ben Bernanke indicated the central bank's massive stimulus programme will start unwinding this year if all stays well in the world's biggest economy.

The kiwi traded at 77.47 US cents at 5pm in Wellington from 77.34 cents at 8am and 77.51 cents on Friday in New York. It was at 80.45 cents just before the Fed announcement on Wednesday in Washington. The trade-weighted index was 73.21 from 73.19 last week.

Traders are digesting the Fed's announcement last week that it may reign in its $US85 billion monthly bond-buying programme, amid signs the US economy is on the mend.

The Federal Open Market Committee said risks to the US economy have decreased, and has lowered its forecasts for unemployment and inflation this year. That means investors will likely put more weight on US economic data disappointments, as growth is already factored in.

"QE tapering is with us, it's just a question of when," says Imre Speizer, market strategist at Westpac Banking Corp in Auckland. "In the near-term we may see a bounce in the kiwi (if US data disappoints), but eventually it does look like the kiwi will go lower."

He expects it will break below 77 US cents, though he says that is unlikely to happen in the next few days.

A BusinessDesk survey of nine strategists predicts the local currency may trade between 75 US cents and 80 cents this week, with a downside bias.

Government figures today showed New Zealand's monthly net immigration was at a 3.5-year high in May, with some 1740 more new migrants arriving than leaving.

Underpinning the gain was that few Kiwis were quitting the country for Australia, which has been increasingly attractive in recent years with its higher standard of living and wages.

Increasing migration is seen as one of the key risks fuelling Auckland's bubbling property market, a major threat to New Zealand's financial stability and a counter-balance to the Reserve Bank's view interest rates will stay at record low levels for longer.

The kiwi rose to 84.08 Australian cents at 5pm in Wellington from 84.04 cents on Friday in New York and gained to 76.21 yen from 75.87 yen. It traded at 59.11 euro cents from 59.07 cents last week and inched up to 50.39 British pence from 50.27 pence.

(BusinessDesk)