The New Zealand dollar is little changed this morning as investors weigh the impact of a possible reduction in the Federal Reserve's monetary stimulus.
The kiwi recently traded at 77.56 US cents, from 77.47 cents at 5pm in Wellington yesterday. The trade-weighted index slid to 73.08 from 73.21 yesterday.
Traders are eyeing new data from the US for clues as to when the Federal Reserve will start tapering its US$85 billion a month bond-buying programme, following chairman Ben Bernanke's comments on June 19 that it might start winding back this year and end in mid-2014. Reports on Tuesday on house prices, house sales and durable goods orders will give an indication as to how the US economy is tracking.
"The markets are consolidating their position and having a think about where the world sits before we can make our next moves," said Stuart Ive, senior client adviser, foreign exchange and derivatives at OM Financial. If the reports meet expectations "that would add strength to that US dollar story, that the data is improving and the Fed is right to be looking at taking stimulus off the cards. If that was to happen, we may see the kiwi start nudging a little bit lower again."
"If we see weaker data from the US that reaffirms this period of consolidation," Ive said "I don't think we will go racing to the upside, we will continue to tread water until we get a clear idea of what direction the US dollar is taking again. The US dollar is probably going to continue to strengthen over the coming weeks."
