The New Zealand dollar held gains in local trading ahead of statements from the Federal Reserve and Reserve Bank tomorrow.
The kiwi traded at 79.20 US cents at 5pm in Wellington from 79.25 cents at 8am and 78.98 cents yesterday. The trade-weighted index advanced to 76.83 from 76.71 yesterday.
Traders are awaiting the outcome of the Federal Open Market Committee meeting on Wednesday in Washington for a steer on whether the world's biggest central bank will continue moving away from its extraordinary stimulus measures it's had in place to combat the global financial crisis in 2008. Weaker than expected US data in recent days and comments from Fed official James Bullard earlier this month that the Fed should hold off ending its bond-buying programme have put the meeting under greater scrutiny.
"You've seen such a big move to the downside (in the kiwi), but certainly any mention of QE (quantitative easing) is only going to see things go one way, and that's a massive risk-on environment," said Alex Hill, head of corporate FX at NZForex in Auckland. "You saw the low (in the kiwi) and it looked like a bounce was imminent before we got the next sell-off and it takes a piece of fundamental news to back that up."
The Fed meeting comes just ahead of New Zealand's Reserve Bank policy review on Thursday, which is expected to keep the key rate unchanged at 3.5 percent. Investors will be looking to see whether governor Graeme Wheeler takes a softer tone on future hikes, given the tepid pace of inflation, which is at the bottom end of the bank's tolerance range.
