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NZ dollar little changed on week, belying volatility

NZ dollar little changed on week, belying volatility

By Tina Morrison

Oct. 3 (BusinessDesk) - The New Zealand dollar is likely to be little changed at the end of this week, belying the volatility of events that saw it drop to its lowest in more than a year.

The kiwi was trading at 78.64 US cents at 5pm in Wellington, unchanged from its level at 8am on Monday, and a touch weaker than at 78.98 US cents at 8am this morning. The trade-weighted index was at 76.63 from 76.69 on Monday.

The local currency touched 77.07 US cents on Monday, its lowest level in more than 13 months, after the Reserve Bank confirmed it had intervened in the currency market during August to try and lower the value of the kiwi, and following Prime Minister John Key's suggestion the 'Goldilocks' rate for the currency, neither too high nor too low, may be about 65 cents. The kiwi was further dented by a slide in the latest GlobalDairyTrade auction midweek where dairy product prices fell to their lowest in five years, weighing on the outlook for the nation's largest commodity export. While the currency rebounded to touch a high of 79.25 US cents yesterday, it has fallen significantly since its high of 88.35 cents in July.

"It's just pillar to post. We have had such a dramatic fall, we are now just undergoing a period of consolidation and a little bit of profit taking and a lot of holding one's breath, waiting to see what happens next," said Peter Cavanaugh, client adviser at Bancorp Treasury Services. "What concerns us is the sort of volatility we are seeing in currency and interest rate markets in the past one to six weeks is the sort of volatility you would see in times of crisis but there is no apparent crisis out there and that's of concern. It's almost as if markets are dodging shadows."

Tonight, traders are awaiting September employment data out in the US as a recovery in the world's largest economy and the prospect of higher interest rates there has been a major influence on the kiwi's weakness.

The non-farm payrolls release is expected to show US employers added 215,000 workers in September, up from 142,000 the previous month. Revisions to earlier data will also be keenly watched after June and July figures were both revised at last month's release, Bancorp's Cavanaugh said.

The New Zealand dollar weakened to 89.41 Australian cents from 89.63 cents on Monday, advanced to 62.13 euro cents from 61.96 cents, gained to 48.74 British pence from 48.39 pence and slipped to 85.54 yen from 85.87 yen.


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