The New Zealand dollar stuck to a very tight range as the two-day meeting by Federal Reserve policymakers is about to get underway, with all eyes on interest rate projections.

The kiwi dollar traded at 69.20 US cents in Wellington, down from 69.35 cents late yesterday. The trade-weighed index dipped to 75.83 from 75.93.

"The market is waiting, anxiously, for the Fed," said Westpac Banking Corp senior strategist Imre Speizer.

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Given markets are widely expecting the US Federal Open Market Committee to lift the fed funds rate a quarter point to a range of 0.75 per cent to 1 per cent, the main focus will be on the so-called "dot plot", which it uses to signal its outlook for the path of interest rates, he said.


If the forecasts indicate two more rate increases there may be some US dollar profit-taking, which will benefit the kiwi, said Speizer. However, if they point to three further rate increases, the New Zealand dollar will fall.

Markets will also be watching for the Dutch election result, issues around Brexit and a Group of 20 finance ministers meeting in Germany late in the week.

Domestically he said the New Zealand dollar will likely have a short-term reaction to the fourth-quarter gross domestic product data due Thursday. Westpac is expecting the economy to grow 0.5 per cent in the quarter while the median in a BusinessDesk poll of economists is for 0.75 per cent growth.

Speizer said the data is largely dated and so any move in the currency won't be sustained unless it's a massive surprise. Ahead of the GDP data, Statistics New Zealand will publish fourth-quarter balance of payments figures on Wednesday. Bank of New Zealand is tipping the annual current account deficit to fall to 2.6 per cent of GDP, from 2.9 per cent in the third quarter.

The kiwi dollar traded at 64.96 euro cents from 64.83 cents yesterday. It was at 91.54 Australian cents versus 91.61 cents and 4.7852 yuan from 4.7900 yuan. It slipped to 79.42 yen from 79.61 yen and to 56.72 British pence from 56.94 pence.

The two-year swap rate was 1 basis point lower at 2.31 per cent and the 10-year swaps eased 1 basis point to 3.57 per cent.