NZ dollar falls as Bernanke view digested

NZ dollar falls as Bernanke view digested, risk appetite wanes

By Paul McBeth

March 1 (BusinessDesk) – The New Zealand dollar fell after US Federal Reserve chairman Ben Bernanke said the world’s biggest economy kicked off the year well, sapping investors’ appetite for higher-yielding, or riskier, assets.

The kiwi fell to 83.50 US cents at 5pm from 83.86 cents at 8am, having dropped from 84.17 cents yesterday. The trade-weighted index declined to 73.56 from 73.78.

The Fed’s Bernanke told the House of Representatives the US is adding jobs across all industries and the unemployment rate is falling faster than expected. Investors interpreted that as a hint the Fed might move on interest rates earlier than the previously flagged 2014, even though Bernanke told policymakers otherwise.

Traders are betting Bernanke will hike rates by 15 basis points over the coming 12 months, lifting their expectations by 8.3 basis points, according to the Overnight Index Swap curve.

“US data keeps improving and Bernanke finally admitted it - that puts the risk of the Fed moving sooner rather than later,” said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. “It’s certainly done a bit of damage to the euro bulls and Aussie and kiwi bulls,” he said referring to the trans-Tasman currencies colloquially.

The currency may be in for another leg lower if US manufacturing and employment data continues to show an improving economy. The Fed’s ‘beige book’, which follows anecdotal economic activity around the US, showed “modest to moderate” growth last month.

Chinese manufacturing data showed an improving sector in the world’s second biggest economy, offsetting some of the negative sentiment, though a 1.4 percent fall in New Zealand’s terms of trade in the fourth quarter sapped demand for the kiwi.

The kiwi fell to 77.65 Australian cents from 77.85 cents yesterday, and was little changed at 67.67 yen from 67.71 yen. It fell to 62.61 euro cents from 64.22 cents yesterday and declined to 52.45 pence from 52.82 pence.

(BusinessDesk)

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