Dollar gains after Fed's greenback concerns surprise market

The New Zealand dollar gained after minutes from the Federal Reserve's September policy meeting surprised traders, showing the world's biggest central bank was concerned with the strength of the greenback.

The kiwi rose to 79.39 US cents at 5pm in Wellington from 78.96 cents at 8am and 77.90 cents yesterday. The trade-weighted index advanced to 76.96 from 75.96 yesterday.

The local currency extended its gain in the local session after the release of the Fed minutes, which showed policy makers at the world's biggest central bank were concerned a global slowdown and a stronger currency posed risks for the US economy. The greenback has been on an upward trajectory since the end of June as traders firmed up their bets the Fed will start raising interest rates next year, ending a zero-interest rate policy that has been in place since the global financial crisis.

"We don't think that this means they'll be discouraged from raising rates in the middle of next year because of US dollar strength, it was simply something that needs to be flagged," Raiko Shareef, Bank of New Zealand currency strategist, said. "It doesn't change the view that the kiwi is in a downtrend."

BNZ's Shareef said the local currency will probably trade between 76 US cents and 80 cents in the coming months.

Government figures today showed New Zealand retail spending on credit and debit cards fell 0.4 percent in September, after economic indicators point to optimism earlier in the year not playing out with the equivalent activity.

The local currency rose to 89.41 Australian from 88.82 cents yesterday after employment figures showed the number of people employed across the Tasman fell by 29,700. Australia's Bureau of Statistics yesterday said it would revise employment reports for the past two months, which were unusually volatile. Reserve Bank of Australia Governor Glenn Stevens this week said labour data had been volatile recently,and that tepid wage growth would remain a constraint on inflation.

The kiwi gained to 62.29 euro cents from 61.64 cents yesterday, and rose to 49.04 British pence from 48.50 pence. It advanced to 85.65 yen from 84.41 yen yesterday.

(BusinessDesk)