Kiwi takes a hit after Fed holds its breath
The Federal Reserve's June meeting minutes fail to give an explicit signal on further stimulus for the world's biggest economy, sapping the appeal of growth-linked currencies.
BUSINESSDESK: The New Zealand dollar fell from near 80 US cents after the minutes of the Federal Reserve’s June meeting failed to give any explicit signal on further stimulus for the world’s biggest economy, sapping the appeal of growth-linked currencies.
The kiwi dollar recently traded at 79.65 US cents, up from 79.44 cents at 5pm in Wellington yesterday. It hit 79.98 cents ahead of the release of the FOMC minutes. The trade-weighted index rose to 72.46 from 72.28.
While the Fed expressed concern about the economic outlook for the US, policymakers are looking for conditions to deteriorate before they are ready to act, according to the minutes of the June 19-20 gathering.
Investors had hoped for signs that additional action was likely at the FOMC's next meeting. The US dollar strengthened against most major currencies after the minutes were released as investors sought the relatively safety of the world’s reserve currency.
“The FOMC gave the currency a good clobbering,” said Imre Speizer, market strategist at Westpac Banking Corp. “The market was primed for something more explicit.”
He said if the kiwi breaks below 79.30 cents today it could quickly fall as low as 78.50 cents.
It is likely to continue its slide through the rest of the week with Chinese economic growth, production and retail sales figures expected to add to signs the world’s fastest-growing major economy is losing steam.
New Zealand’s performance of manufacturing, food prices and the ANZ Roy Morgan Consumer Confidence reports are out today.
Economic releases from China “are expected to show the Chinese economy is still in slowdown mode”, Mr Speizer said. “That will be seen as a negative for markets and the kiwi.”
The kiwi rose to 65.04 euro cents from 64.83 cents yesterday and hit 63.47 yen from 63 yen. It traded at 77.71 Australian cents from 77.87 cents and rose to 51.39 British pence from 51.18 pence.
Jonathan Underhill
Thu, 12 Jul 2012
Thu, 12 Jul 2012
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Kiwi takes a hit after Fed holds its breath
22080