NZ dollar edges higher as US dollar retreats

New Zealand Herald Photograph - NZ DOLLAR

The New Zealand dollar edged higher as the US dollar retreated from its earlier surge after the Federal Reserve signalled US interest rates could rise in December.

The kiwi advanced to 66.93 US cents at 8am in Wellington, from 66.60 cents at 5pm yesterday. The trade-weighted index gained to 72.65 from 72.23 yesterday.

The US dollar index, which measures the greenback against a basket of currencies, fell after jumping to a 2 1/2 month high when the Federal Reserve Open Market Committee kept interest rates unchanged but left open the possibility of a hike in December. In New Zealand, the Reserve Bank also kept interest rates unchanged but signalled they may fall further. A report overnight showed the US economy expanded 1.5 percent in the third quarter, just shy of analyst expectations for 1.6 percent growth.

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"After the US dollar was catapulted higher yesterday morning on the US FOMC statement, it has subsequently drifted lower," Bank of New Zealand senior market strategist Kymberly Martin said in a note. "Although the US dollar experienced a bit of volatility around the release of the soft US Q3 GDP number early this morning, this was not the primary reason for the softer tone in the US dollar. It seemed to just be taking a breath after its surge higher yesterday morning."

In New Zealand today, building consent data for September is released at 10:45am, while the ANZ business confidence survey for October is due at 1pm.

The New Zealand dollar advanced to 81.05 yen from 80.35 yen yesterday ahead of the release of Japanese inflation data for September and the Bank of Japan monetary policy decision.

BNZ's Martin said the BoJ is unlikely to change policy at today's meeting, but may ease further in coming months as it struggles to achieve its inflation target.

The local currency gained to 4.2535 yuan from 4.2336 yuan yesterday after China changed its one-child policy of 35 years, allowing families to have two children in the future.

The kiwi rose to 94.48 Australian cents from 93.71 cents yesterday. It was little changed at 43.70 British pence from 43.65 pence yesterday, and at 60.98 euro cents from 60.97 cents.