NZ dollar down against US

Photo / File
Photo / File

The New Zealand dollar fell after Federal Reserve Chairman Ben Bernanke told the US congress that the central bank is prepared to act to boost growth if the labour market doesn't improve, without giving a clear signal on the timing of any extra stimulus.

The New Zealand dollar fell as low as 79.27 US cents in Northern Hemisphere trading from 79.96 cents at 5pm in Wellington. It traded at 79.74 cents at 8am. The trade weighted index decreased to 72.26 from 72.40.

The Fed's Bernanke told lawmakers reducing unemployment is likely to be "frustratingly low" and Federal Open Market Committee is considering whether additional stimulus will be needed to reduce the jobless rate, which has been stuck above 8 per cent since February 2009. Markets were looking for more guidance on whether he'll act sooner rather than later.

"Currencies flew around all over the place as investors scoured the details for clues on future Fed action," said Mike Jones, market strategist at Bank of New Zealand.

"In the end, Bernanke offered nothing particularly new, so most currencies have settled back to their levels."

Markets will keep watching the second day of Bernanke's semi-annual monetary policy report for further clues about the potential and timing of easing to lift the pace of growth. In June, the Fed agreed to expand Operation Twist, extending the maturities of assets on its balance sheets.

"If anything the market is starting to factor in a high chance of quantitative easing and this will push the US dollar lower," Jones said.

Prices at this morning's Fonterra GlobalDairyTrade auction fell for a third month in a row, pushing the benchmark composite price further below its long-term average. The GDT-TWI Price Index fell 0.9 per cent compared to the last sale two weeks ago.

In New Zealand there is no further data set for release today.

The New Zealand dollar declined to 77.33 Australian cents at 8am from 77.53 cents at 5pm. It was largely unchanged at 50.97 British pence from 51.04 pence and little changed at 64.92 euro cents from 65 cents. The kiwi increased to 63.16 yen from 63.06 yen.

- BusinessDesk

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