NZ dollar gains as markets dig in for more Fed news

The New Zealand dollar gained as markets dial back their support for the US dollar as they await more information from the US Federal Reserve on its plans to shift away from running a zero interest rate policy.

The kiwi rose to 78.31 US cents at 8am in Wellington from 77.96 cents yesterday. The trade-weighted index was little changed at 77.19 from 76.17 yesterday.

Traders pared back their support for the greenback after its steady gain since the end of June, with the US dollar index, a measure against a basket of currencies, up as much as 8.7 percent. The Fed is scheduled to release minutes to the Federal Open Market Committee’s September policy meeting on Wednesday in Washington, and the central bank completes its bond  purchase programme tomorrow. The prospect of higher US interest rates has been a key driver for increased appetite for the greenback.

“We’re still seeing profit-taking on the US dollar ahead of the FOMC,” said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland. “The kiwi’s probably in for two to three weeks’ worth” of consolidation, he said.

Kelleher said the local currency may trade between 78 US cents and 78.75 cents today with good demand on dips, and could push back up to 80 cents in coming weeks as traders rein in their support for the greenback.

The local currency fell to 88.85 Australian cents from 89.12 cents yesterday after the Reserve Bank of Australia kept its key rate at 2.5 percent, while saying tepid wage growth will likely keep inflation in check, even as that nation’s dollar depreciates.

The kiwi fell to 84.67 yen from 85.05 yen yesterday after the Bank of Japan kept its quantitative easing programme intact as it looks to stoke inflation to an annual 2 percent rate.

The local currency traded at 61.86 euro cents from 61.78 cents yesterday after weak German industrial production figures, and was little changed at 48.66 British pence from 48.59 pence yesterday.

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