Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


NZ dollar little changed on fed tapering, GDP looms

NZ dollar little changed after Fed starts modest tapering as NZ GDP looms

By Tina Morrison

Dec. 19 (BusinessDesk) – The New Zealand dollar was little changed after the Federal Reserve decided to push the button on a long-awaited reduction of its monetary stimulus programme which has weakened the greenback.

The kiwi was little changed at 82.47 US cents at 8:10am in Wellington, following the 8am statement, from 82.50 cents at 5pm yesterday. The trade-weighted index slipped to 77.69 from 77.78 yesterday.

The Fed said it would reduce its 15-month-old asset purchase programme by US$10 billion to US$75 billion a month in light of improving labour market conditions that suggest better prospects for the world’s largest economy. Still, the Fed reiterated that interest rates would remain near zero, contrasting with New Zealand where rates are set to start rising early next year.

“I really don’t think the kiwi is going to take a big dive here,” said Stuart Ive, senior advisor at OMF. “They have reiterated that they are not going to be in any rush to raise interest rates. They will take this gently go-lightly approach to unwinding.”

“This is not tightening, they are still stimulating their economy by US$75 billion per month and not raising interest rates is still a form of stimulus,” Ive said. “The US is still very much in a stimulative stage whilst we are not and on that basis alone, that will be supporting the kiwi/US. We will certainly be raising rates long before the US will be.”

Investors will now be looking ahead to a 10:45am report on New Zealand's third-quarter gross domestic product, which is expected to show quarterly growth of 1.1 percent.

The Fed said it was likely to remain appropriate to keep interest rates near zero well past the time the jobless rate falls below 6.5 percent. The bank had previously committed to keeping benchmark credit costs steady at least until the jobless rate hit 6.5 percent. In November, the unemployment rate was at a 5-year low of 7 percent.

The Fed lowered its expectations for inflation and unemployment over the next few years.

The Fed was forecast to start curtailing its monthly bond purchases this week after unexpectedly refraining from reducing them in September, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, an increase from 17 percent in a Nov. 8 survey.

“The market is pleased to get the cat out of the bag, it is quite a relief we know the path now,” said OMF’s Ive. “But equally we are not going to see these massive falls that some people predicted.”

The New Zealand dollar edged lower to 59.81 euro cents at 8:10am from 59.90 cents at 5pm yesterday. The kiwi weakened to 50.20 British pence from 50.65 pence yesterday after a report showed unemployment dropped to 7.4 percent, edging closer to the Bank of England’s 7 percent threshold, raising it may have to raise interest rates sooner. The local currency advanced to 85.12 yen from 84.98 yen yesterday after a report showed Japan’s trade deficit widened to a record.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Welcome Home: Record High Migration Stokes 41-Year High Population Growth

New Zealand annual net migration hit a new high in October as more people arrived from than departed for Australia for the first time in more than 20 years. More>>


Citizens' Advice Bureau: Report Shows Desperate Housing Situation Throughout NZ

CAB's in-depth analysis of over 2000 client enquiries about emergency accommodation shows vulnerable families, pregnant women and children living in cars and garages, even after seeking assistance from the Ministry of Social Development and Housing New Zealand. More>>


Speaking For The Bees: Greens Call For Neonicotinoid Pesticide Ban

The National Government should ban the use of controversial pesticides called neonicotinoids after evidence has revealed that even at low doses they cause harm to bee populations, the Green Party said today. More>>


Science Awards: NZAS Celebrate NZ Scientific Achievements

The Marsden Medal is awarded for a lifetime of outstanding service to the cause or profession of science, in recognition of service rendered to the cause or profession of science in the widest connotation of the phrase. This year’s medal is awarded to Dr Mike Andrews. More>>


Court Rules: Affco 'Unlawfully' Locked Out Meat Workers

The note says the full court found for the plaintiffs, "that is that the defendant locked out the second plaintiffs unlawfully and that it breached s 32 of the Act by acting otherwise than in good faith towards the plaintiffs while collective bargaining was still going on." More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news