NZ dollar up overnight

The kiwi was little changed at 84.15 US cents at 8am in Wellington from 84.13 cents at 5pm yesterday.

The New Zealand dollar advanced in a tight trading range as investors mull the outlook for monetary stimulus in the US, and ahead of local economic data which is expected to show a strengthening economy.

The kiwi rose to 82.55 US cents at 8am in Wellington, from 82.32 cents at the 5pm market close yesterday, having traded in a 65 basis point range overnight. The trade-weighted index increased to 77.20 from 77.07 yesterday.

Investors are holding back on large bets on the currency amid uncertainty about when the US Federal Reserve is likely to start pulling back on its US$85 billion a month monetary stimulus programme. Better-than-expected US jobs data last week has prompted some investors to speculate that the Fed may start tapering the programme as early as next month, although some Fed officials have indicated more data showing a revival in the world's largest economy is needed.

"We are in a fairly tight range of 81.80 to 82.80 (US cents) at the moment because it is such a confusing picture. We need a decisive plan laid out by the Americans on what they are going to do," said Stuart Ive, senior client advisor, foreign exchange and derivatives at OM Financial "No-one really wants to put their best foot forward because you don't know what the whole picture is at the moment."

Better economic data in New Zealand will continue to underpin the kiwi, Ive said.

In New Zealand today, traders will be eyeing the BNZ PMI manufacturing report for October at 10:30am, third quarter retail sales figures at 10:45am and the ANZ consumer confidence report for November at 1pm.

"The New Zealand economy continues to outperform on a global scale and that is why we still have a fairly solid currency. The moves to the downside tend to be fairly temporary at the moment," Ive said.

Overnight, the focus will be on the testimony of incoming Fed chair Janet Yellen at her Senate confirmation hearing. Yellen is expected to continue to support US monetary stimulus, which has weakened the greenback.

Current Fed chairman Ben Bernanke is scheduled to speak to teachers, although this isn't expected to move markets.

The New Zealand dollar advanced to 88.56 Australian cents from 88.40 cents yesterday and increased to 82.13 yen from 81.91 yen ahead of a report today expected to show Japan's GDP growth slowed in the third quarter from the second quarter.

The local currency rose to 61.37 euro cents from 61.22 cents yesterday after the European Central Bank executive board member and chief economist Peter Praet told the Wall Street Journal the bank still had room to cut interest rates further and noted it could start to buy assets, in an attempt to increase inflation towards its target.

The kiwi slipped to 51.56 British pence from 51.80 pence yesterday after the Bank of England said the British unemployment rate could fall to 7 per cent in the fourth quarter of 2014 after data showed it fell to 7.6 per cent in the third quarter from 7.7 per cent in the second quarter.

That raised the prospect the UK central bank may raise interest rates earlier than expected.