NZ dollar holds above 80 US cents

The New Zealand dollar may trade in a range of 85 US cents and 86 cents today. Photo / File

The New Zealand dollar was little changed as traders weigh growth prospects for the local economy with the possible tapering of stimulus in the US.

The kiwi recently traded at 80.44 US cents, from 80.39 cents at the New York close and 80.56 cents at 5pm in Wellington Friday. The trade-weighted index edged lower to 74.47 from 76.72 in Wellington on Friday.

Recent reports from the US have shown the world's largest economy holding firmly to a path of cautious yet sustainable recovery. That has heightened expectations that the Federal Reserve will take its foot off the stimulus pedal which has been holding down the value of the greenback.

"Central banks are really ruling the roost," said Michael Johnston, senior trader at HiFX. "The big news event for this week is the US Federal Reserve meeting to decide their interest rates. They are not going to change rates but they may give indications of when they are going to taper."

The Federal Reserve Open Market Committee starts a two-day meeting tomorrow. Fed Chairman Ben Bernanke last month suggested the central bank might reduce the pace of its US$85 billion monthly bond-buying programme. Bernanke will host a news conference Thursday morning New Zealand time after the committee releases its latest policy statement.

In New Zealand, a report on Thursday is expected to show the nation's economy probably grew at a slower pace in the first three months of the year, after expanding at the fastest clip in three years in the fourth quarter of 2012, led by construction and manufacturing.

New Zealand gross domestic product rose at an annual rate of 2.5 per cent in the first quarter, according to a Reuters survey of 10 economists. The economy grew 1.5 per cent in the fourth quarter last year.

On Wednesday the government statistician is scheduled to release balance of payments figures for the first quarter. That's expected to show New Zealand's current account deficit narrowed to $600 million in the first quarter from a gap of $3.26 billion three months earlier, according to a Reuters survey

The New Zealand dollar dropped in volatile trading to 75.78 yen from 76.72 yen on Friday. The local currency ranged between 75.57 yen to 77.42 yen since the weekend as traders weighed the outlook for Bank of Japan stimulus. The central bank failed to increase economic stimulus at its last meeting and minutes showed one policy maker favoured restricting stimulus to a two-year period.

The kiwi was little changed at 84.09 Australian cents from 84.01 cents, at 60.23 euro cents from 60.37 cents, and at 51.16 British pence from 51.32 pence.