NZ dollar slips as markets await Bernanke testimony

The New Zealand dollar slipped in local trading as investors await US Federal Reserve chairman Ben Bernanke’s Congressional testimony, where they’ll look for any hints on the central bank unwinding its asset purchase programme.

The kiwi traded at 78.70 US cents at 5pm in Wellington from 78.97 cents at 8am and 78.28 cents yesterday. The trade-weighted index edged up to 74.50 from 74.35 yesterday.

Bernanke kicks off a two-day testimony to the House of Representatives in Washington on Wednesday, and traders will be looking for more clues as to whether the Fed plans to unwind its US$85 billion a month bond buying programme this year. The Fed has signalled it will slow down the money printing programme if the US economy continues to recover, and that’s spurred the greenback to rally over recent months.

“He’ll be dancing around the flame and he won’t want to be too specific,” said Michael Johnston, senior trader at HiFX in Auckland. “The kiwi’s recent rally is just an opportunity for importers to get in at better levels” and it will turn back down eventually, he said.

The kiwi and Australian dollars got a boost from yesterday’s release of the minutes to the RBA’s July meeting, which showed a lower inflation outlook due to the recent depreciation in the currency. That prompted some investors to cut back their bets on a rate cut by the RBA.

A 4.9 percent lift in the trade-weighted price of dairy products sold on Fonterra Cooperative Group’s GlobalDairyTrade auction helped the kiwi. Dairy accounts for about a quarter of New Zealand’s exports.

Government data yesterday showed New Zealand’s consumers price index rose at an annual pace of 0.7 percent in the June quarter, its slowest pace for inflation since 1999 as the strong kiwi dollar took the edge off imported prices and offset gains in construction costs and rising electricity prices.

The local currency traded at 85.29 Australian cents at 5pm in Wellington from 85.39 cents yesterday, and edged up to 78.21 yen from 78.09 yen. It was almost unchanged at 59.88 euro cents from 59.87 cents yesterday, and rose to 52.07 British pence from 51.82 pence.


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