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Kiwi steady as investors weigh impact of Fed stimulus reduction

Reports overnight on house prices, home sales and durable goods orders will indicate how the US economy is tracking.

Tina Morrison
Wed, 11 Jul 2018

The New Zealand dollar is little changed as investors weigh the impact of a possible reduction in the Federal Reserve's monetary stimulus.

The kiwi recently traded at 77.56 US cents, from 77.47 cents at 5pm in Wellington yesterday. The trade-weighted index slid to 73.08 from 73.21 yesterday.

Traders are eyeing new data from the US for clues as to when the Federal Reserve will start tapering its $US85 billion a month bond-buying programme, following chairman Ben Bernanke's comments on June 19 that it might start winding back this year and end in mid-2014.

Reports on Tuesday (US time) on house prices, home sales and durable goods orders will give an indication as to how the economy is tracking.

"The markets are consolidating their position and having a think about where the world sits before we can make our next moves," says Stuart Ive, senior client adviser, foreign exchange and derivatives at OM Financial.

If the reports meet expectations "that would add strength to that US dollar story – that the data is improving and the Fed is right to be looking at taking stimulus off the cards. If that was to happen, we may see the kiwi start nudging a little bit lower again".

"If we see weaker data from the US that reaffirms this period of consolidation," Mr Ive says "I don't think we will go racing to the upside, we will continue to tread water until we get a clear idea of what direction the US dollar is taking again. The US dollar is probably going to continue to strengthen over the coming weeks."

Overnight, the US dollar dipped after Federal Reserve Bank of Dallas president Richard Fisher said investors should not overreact to the central bank's plan to reduce the pace of bond purchases.

Trading in the kiwi is likely to be quiet in Asia today with no data reports scheduled for release, Mr Ive says, and it is likely to find support at 76.80 US cents.

The kiwi slipped to 83.70 Australian cents from 84.08 cents yesterday and dropped to 75.71 yen from 76.21 yen. It weakened to 59.07 euro cents from 59.11 cents and slipped to 50.20 British pence from 50.39 pence.


Tina Morrison
Wed, 11 Jul 2018
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Kiwi steady as investors weigh impact of Fed stimulus reduction