NZ dollar firm as euro nudges higher

Traders are waiting for a cash rate review by the Reserve Bank tomorrow. File photo
Traders are waiting for a cash rate review by the Reserve Bank tomorrow. File photo

The New Zealand dollar is firm, reflecting indications of improving European economies and the expectation that central banks in New Zealand and the United States will keep policy easy this week.

The kiwi was at 83.73 US cents at 8am, up from 83.61 US cents at 5pm on Tuesday.

The international backdrop is looking better with the Dow Jones Industrial Average at a five-year high as this market geared up for a new day.

A positive German consumer confidence report added to the upbeat tone, as the rising euro continued to test US$1.35, a key resistance level.

"It's nudging ever closer to that magical $1.35 level and someone is going to break through and it will possibly rise to $1.40," Imre Speizer, senior markets strategist at Westpac said.

He said building permits data due today will not be a market mover.

Traders are waiting for a statement by the US Federal Reserve's Open Market Committee at 8.15am NZ time on Thursday, and the cash rate review by the Reserve Bank of New Zealand which will follow it.

Speizer said the Reserve Bank comments may be more dovish than the last press release in December, which could cause a little kiwi selling.

The FOMC may reaffirm that stimulatory programmes will be kept in place after mumble previously of a possible exit.

"I'd expect Bernanke (Fed chairman Ben Bernanke) to say parts of the economy have improved but parts are still a bit questionable. That might cause US interest rates to dip. That's a potential up for the kiwi," he said.

Friday's US payrolls data is a big event for the market but evidence ahead of it has been conflicting.

"It's a crap shoot more than usual," Speizer said.

The kiwi was at 79.99 Australian cents from 80.16 cents at 5pm on Tuesday and was at 75.94 yen from 76.08.

It was at 62.08 euro cents from 62.16, and at 53.15 British pence from 53.27.

The trade-weighted index was at 75.28 from 75.62.

- BusinessDesk

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