The New Zealand dollar gained after a report showed the US economy grew less than previously estimated in the first quarter, easing speculation the Federal Reserve will start slowing monetary stimulus any time soon.
The kiwi rose to 77.91 US cents from 77.35 cents at 5pm in Wellington yesterday. The trade-weighted index increased to 73.60 from 72.98 yesterday.
The local currency has shed about 4 per cent since Federal Reserve chairman Ben Bernanke said last week that he will start pulling back the central bank's US$85 billion a month bond buying this year should economic data continue to improve. Yesterday's weaker GDP report comes after upbeat reports the previous day on durable goods orders, sales of new homes, home prices and consumer confidence.
"With the stronger US data and no continued US dollar buying, the market was exhausted and looking for a reason to pare back their US dollar longs and they got it with a weaker GDP," said Sam Tuck, senior manager FX at ANZ New Zealand. "A lot of the forward looking tapering factors have already been accommodated into the price so we are probably likely to get more sideways consolidation with lots of volatility."
US gross domestic product expanded at a revised 1.8 per cent annual pace in the first quarter, down from a revised 2.4 per cent, according to Commerce Department figures. That lags New Zealand growth of 2.5 per cent.
