NZ dollar holds value after Federal Reserve officials reassure markets about stimulus

The New Zealand dollar held its value after Federal Reserve officials assured markets about the withdrawal of economic stimulus.

The kiwi slipped to 77.98 cents from 78.19 cents at the 5pm market close in Wellington yesterday. The trade-weighted index weakened to 73.69 from 73.75 yesterday.

Federal Reserve officials yesterday stepped up their campaign to clarify comments by chairman Ben Bernanke about reducing stimulus that have caused volatility in global financial markets. Officials including Federal Reserve Bank of New York president William Dudley said the central bank may prolong its asset purchase programme if the economy’s performance fails to meet its forecasts.

“The Fed speakers are all telling us that the market has misunderstood what the Fed was saying and that the market reaction has been an overreaction,” said Stuart Ive, senior client adviser FX at OM Financial. “What that has done is temporarily stop the downside movement” of the kiwi.

The local currency is likely to stay in its broad range of 76.80 US cents to 78.60 cents heading into next week, Ive said.

A report on building consents for May in New Zealand today is expected to show continued strength and will likely help underpin the kiwi, he said.

The New Zealand dollar was little changed at 83.97 Australian cents from 83.90 yesterday and increased to 76.61 yen from 76.43 yen. The kiwi weakened to 59.78 euro cents from 59.99 cents and advanced to 51.08 British pence from 50.97 pence yesterday.

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