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NZ dollar holds above 74 cts before GDP, sinks vs AUD

NZ dollar holds above 74 cts before GDP; reaches 10-year low vs AUD

By Paul McBeth

Dec. 23 (BusinessDesk) – The New Zealand dollar held above 74 U.S. cents ahead of today’s third-quarter gross domestic product data, while rising commodity prices picked up the Australian dollar and pushed the cross-rate to a fresh 10-year low.

New Zealand’s economy probably grew 0.2% in the three months ended Sept. 30 according to a Reuters survey, as the recovery stalled through the second half of the year. Weak business confidence and a soft construction sector may push the economy into contraction, and a downward revision in second-quarter GDP could show New Zealand dipped back into recession. The kiwi fell as low as 74.01 Australian cents as the Thomson Reuters/Jefferies CRB Index, a broad measure of commodity prices, rose 0.3% to 327.83.

“The kiwi was confined to a very tight 40 pip range above 74 U.S. cents and is looking ahead to today’s GDP figures for direction,” said Mike Jones, strategist at Bank of New Zealand. “If we see a weak GDP number, the kiwi will probably head to a new 10-year low against the Australian dollar, probably below 74 Australian cents.”

The kiwi slipped to 74.11 U.S. cents from 74.17 cents yesterday, and fell to 74.12 Australian cents from 74.44 cents. It was little changed at 67.12 on the trade-weighted index of major trading partners’ currencies from 67.19 yesterday, and declined to 61.96 yen from 62.13 yen. It rose to 56.62 euro cents from 56.48 cents yesterday, and increased to 48.22 pence from 47.93 pence.

Jones said the currency may trade between 74 U.S. cents and 74.40 cents ahead of GDP today, and will take its near-term direction from that data. Even if it comes in negative, traders will probably buy on dips with expectations of a stronger kiwi dollar next year, he said.

Yesterday, New Zealand’s balance of payments showed a smaller than expected current account deficit at 3.1% of GDP, compared to the 3.4% forecast, though that didn’t have much bearing on the kiwi.

The pound had a second tough night after Bank of England minutes from the last monetary policy council meeting showed members were getting concerned about inflation risks. U.K. third-quarter GDP was revised down 0.1 percentage point to 0.7%, while the current account deficit was worse than expected at 9.6 billion pounds.


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