NZ dollar little changed as investors reluctant to take positions amid US government stalemate

The New Zealand dollar was little changed as investors are reluctant to take bets until a standoff on US budget talks is resolved.

The kiwi was at 82.89 US cents at the 5pm market close in Wellington, from 82.91 cents at 8am this morning and 82.80 cents at the start of the week. The trade-weighted index was at 76.77 from 76.81 this morning.

Investors prefer to stand on the sidelines while awaiting resolution of a political stalemate in the US which resulted in a partial government shutdown after Congress failed to pass the budget by this week's deadline. No resolution is imminent to the deadlock, raising concerns about a looming Oct. 17 deadline for the government to reach agreement on lifting the country's debt ceiling or risk defaulting on loans.

"There is an element of risk that it drags on to the debt ceiling," said Martin Rudings, senior advisor at OM Financial. "There's a small chance of default by the Americans if they can't come to any agreement. We are going to start rolling into the debt ceiling issue so there are going to be two issues to resolve at once and if they can't resolve one, it is hard to see how they can resolve two.

"The market has to be cautious and certainly with that background it doesn't really make you want to put on new positions or build more risk on," Rudings said. "If the market defaults it would be chaos, it would be a catastrophic financial meltdown, so you have got to hold on to what you've got and ride it through.

"We just have to bear with it. The Americans have got the whole market held to ransom at the moment."

The New Zealand dollar slipped to 87.86 Australian cents from 88.13 cents this morning and 88.86 cents at the start of the week.

Investors are paring back their positions for the Australian dollar to decline on Australian economic weakness because they don't want to take risks amid an uncertain environment heading into the weekend, said OM Financial's Rudings.

The kiwi slipped to 80.65 yen at the 5pm market close in Wellington from 81.10 yesterday after the Bank of Japan kept monetary policy steady and revised up its assessment on capital expenditure.

The local currency weakened to 60.85 euro cents from 61.04 cents yesterday and edged up to 51.26 British pence from 51.15 pence.

(BusinessDesk)