NZ dollar holds gains as Bernanke sticks to slow tapering story

The New Zealand dollar held gains in local trading after departing US Federal Reserve chair Ben Bernanke said the central bank can be patient about removing its massive stimulus programme until economic recovery is in full-swing, ahead of minutes to its last policy meeting.

The kiwi traded at 83.45 US cents at 5pm in Wellington from 83.43 cents at 8am, up from 83.10 cents yesterday. The trade-weighted index advanced to 77.71 from 77.55 yesterday.

The Fed will retain its "highly accommodative policies for as long as they are needed," Bernanke told the Economists Club in Washington, while saying the central bank got its signalling wrong when the market predicted it would start tapering its US$85 billion a month asset purchase programme. His comments are in line with his deputy and successor, Janet Yellen, which has the markets picking March for the start to tapering.

Bernanke's speech comes ahead of the release of US consumer spending figures and the minutes to the Federal Open Market Committee's last policy meeting, which will also be used as a gauge to when the Fed might start winding back its stimulus.

"The Fed's minutes tomorrow might give a more balanced view" with a broader range of opinions than simply Bernanke's and Yellen's, said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. "The kiwi's going nowhere fast" and will likely continue to trade between 82 US cents and 84 cents, he said.

The local currency had a brief spike after government figures showed multi-year highs in the pace of producer price growth on the strength of the country's milk payout. The producers price index doesn't typically influence movements in the currency.

Reserve Bank assistant governor John McDermott is scheduled to deliver a speech on Friday about influences on the exchange rate. The central bank has been balancing a heating property market, which threatens to fuel increases in consumer spending, against the strong currency cooling imported prices.

The kiwi traded at 88.59 Australian cents from 88.67 cents yesterday, and gained to 83.44 yen from 82.98 yen. It was little changed at 61.53 euro cents from 61.54 cents yesterday, and edged up to 51.77 British pence from 51.62 pence.

(BusinessDesk)