NZ dollar trades in narrow range, may be headed for volatility on Fed speakers, employment data

The New Zealand dollar traded in a narrow range though it may be headed for some volatility as a raft of Federal Reserve speakers take to the airwaves this weekend ahead of next week’s release of the latest Fed minutes and the closely watched monthly US employment data.

The kiwi was at 82.25 US cents at 5pm in Wellington from 81.99 cents at 8am and 82.21 cents at the start of the New Year.

The Fed plans to reduce its bond-buying programme by US$10 billion to US$75 billion this month as it gains confidence about a revival in the world’s largest economy. Investors will be eyeing speeches by a slew of Fed officials this weekend, including Fed Chairman Ben Bernanke, Philadelphia Fed Bank President Charles Plosser, Fed Governor Jeremy Stein and Richmond Fed Bank President Jeffrey Lacker for clues as to the central bank’s plans for further easing of its stimulus programme, which has dented the greenback.

“Over the next two days we are going to get 10 different Fed speeches so that could be quite interesting,” said Chris Weston, chief market strategist at IG Markets. “We may get some more volatility. We will have to see what the different Fed speakers say.”

Next Wednesday, the Fed will release the minutes of its last meeting on Dec. 17-18 when it announced its decision to start pulling back its bond buying. On Friday, investors will be eyeing the US non-farm payrolls data for December which is seen as a key gauge of the US economic recovery.

The US probably added 193,000 payrolls last month, compared with 203,000 in November, according to Reuters polls.

An even lower number could be negative for the greenback and pull back expectations for future tapering, said IG Markets’ Weston.

In the meantime, reduced liquidity in the market is limiting the kiwi to a range of 81.70-82 US cents, he said. There was little reaction to weaker Chinese data out today, he said.

China’s official purchasing managers’ index for the non-manufacturing sector dipped to 54.6 in December from 56 in November, the National Bureau of Statistics said. The services sector survey followed manufacturing PMI data on Wednesday, which showed growth in China’s factory activity slowed slightly in December, while the HSBC PMI survey on Thursday also showed slowing activity.

“There are not a lot of people back at their desks at the moment,” Weston said. “Next week that’s when we will get the full volume coming back in and you can start looking at the moves in a much more significant manner.”

The local currency rose to 60.25 euro cents at 3pm from 59.98 cents at 8am this morning and to 50.02 British pence from 49.98 pence.

The kiwi fell to 91.66 Australian cents from 91.89 cents this morning and little changed at 85.74 yen from 85.81 yen. Japanese banks are closed today for a four-day bank holiday. The trade-weighted index was at 77.67.


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