NZ dollar unchanged in local trading as all eyes on US

The New Zealand dollar was unchanged in the local session as investors took a wait-and-see stance on developments in Washington after the US federal government shut down and legislators remained at an impasse on a temporary funding agreement.

The kiwi traded at 72.81 US cents as at 5pm in Wellington, unchanged from 8am, and barely budging from 72.75 cents on Friday in New York. The trade-weighted index was at 74.85 from 74.77 last week.

Talks between Republican and Democratic leaders of the US Senate continued on Sunday in Washington, but Reuters reported the shutdown will enter its third day on Monday when negotiators failed to reach a deal.

Robert Rennie, chief currency strategist at Westpac Banking Corp in Sydney, said markets were largely quiet in Asia as investors wait to see how US markets react later in the global trading day. "Net-net we are waiting for overnight markets to give us a bit of direction," he said.

Still, the muted reaction in Asia may be because people have learned from history that any impact of a shutdown tends to be minimal. "If you look back over previous shutdowns, then it kind of says let's not get too excited," he said.

Domestic trading was also quiet on Monday with Wellington out for an anniversary day holiday. Rennie said he expects the kiwi to trade close to 72.75 US cents to 73 cents ahead of the fourth-quarter inflation data on Thursday, the main event for the kiwi this week. Economists expect the consumers price index rose 0.4 percent in the three months ended Dec. 31, for an annual increase of 1.9 percent, according to the median in a poll of 13 economists surveyed by Bloomberg.

The kiwi edged up to 91.08 Australian cents from 90.97 cents on Friday in New York and increased to 4.6628 Chinese yuan from 4.6553 yuan. It traded at 80.64 yen from 80.58 yen last week and at 52.48 British pence from 52.45 pence. The kiwi traded at 59.52 euro cents from 59.29 cents last week.

New Zealand's two-year swap rate rose 3 basis points to 2.29 percent while the 10-year swap rose 5 basis points to 3.29 percent as US Treasury yields continued to push higher.

(BusinessDesk)