NZ dollar rises as Fed meet begins, stocks edge up

The NZ dollar rose against the greenback, following global equities higher on Friday. Photo / Dean Purcell
The NZ dollar rose against the greenback, following global equities higher on Friday. Photo / Dean Purcell

The New Zealand dollar rose against the greenback with investors' appetite for higher yielding, or riskier, assets buoyed by speculation that the US Federal Reserve will act to boost the world's biggest economy.

The New Zealand dollar recently traded at 82.25 US cents, up from 82.11 cents yesterday, and rose to 72.12 on the trade-weighted index of major trading partners' currencies from 72.03 previously.

Global markets snapped recent declines amid hopes of further stimulus from the US central bank as it began its extended two-day Federal Open Market Committee meeting in New York.

The market is betting that the Fed will implement 'operation twist', a re-profiling of US government debt to bring long-term rates down and leave the short end of the curve unchanged, a move supportive of business and house lending.

In late afternoon trade, the Standard & Poor's 500 Index rose 0.3 per cent to 1,207.21, and Europe's Stoxx 600 closed 1.8 per cent higher at to 229.10.

"Offshore markets continue to live in hope that tomorrow's US FOMC meeting will deliver further 'stimulus' and as such the risk-on switch will light the way today," said Alex Sinton, a senior dealer at ANZ New Zealand.

"With rising expectations of further US measures, expect the New Zealand dollar to look at resistance today around 0.8281 US cents."

The potential for further stimulus saw the market shrug off Italy's ratings downgrade. Standard & Poor's yesterday cut the country's credit rating by one notch to A, and placed it on negative outlook due to concerns about weakening economic growth, mounting debt levels and the increasingly precarious position of the Silvio Berlusconi-led government.

On the crosses, the kiwi recently traded at 80.18 Australian cents, up from 80.12 cents yesterday, and was little changed at 62.82 Japanese yen from 62.83 yen previously. It rose to 60.15 euro cents from 60.06 cents yesterday, and slipped marginally lower to 52.28 pence from 52.29 pence previously.

Locally, the market will be watching for the mid-morning release of balance of payments data for the three months ended June 30, which economists pick will show a quarterly deficit of $690 million.

Average prices of dairy products extended their slide for a seventh straight sale at Fonterra's latest online auction, to reach a 13-month low. The GDT-TWI Price Index fell 2.1 per cent, according to results posted on the globalDairyTrade auction website. The average winning price fell to US$3,499 a metric tonne, the lowest since August last year, when prices reached US$3,080 a tonne.

The kiwi may trade between a range of 82.10 US cents and 82.81 cents today, Sinton said, with the bias tipped towards further gains if the local data is supportive.

- BusinessDesk

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