The New Zealand dollar traded in a narrow range as investors look for signals indicating when the US Federal Reserve is likely to start tapering its US$85 billion a month monetary stimulus programme.
The kiwi edged up to 83.75 US cents at 8am in Wellington from 83.63 cents at the 5pm market close yesterday, having traded in a tight 37 basis point range overnight. The trade-weighted index advanced to 77.94 from 77.86 yesterday.
The Fed last week unexpectedly chose not to pare back its bond buying programme as it awaits more data showing a sustained revival in the world's largest economy. A reduction in the money printing programme is supportive of the US dollar because it would reduce the volume of the currency in circulation, boosting its value.
"The currency is looking for offshore direction and that offshore direction has got to come around US moves and US moves then define back to taper or not taper," said Alex Sinton, senior dealer at ANZ New Zealand. "Until there is more directional bias out of the US it would be hard to call a build onto recent moves or a reversal of some of the gains."
A report on US revised second quarter GDP scheduled for release on Thursday may provide some direction, Sinton said.
