Dollar holds gains after US Fed minutes queries global outlook

The New Zealand dollar held its gains in local trading after minutes to the US Federal Reserve's last policy meeting raised concerns about the global economic outlook and stoked speculation the US central bank will keep interest rates near zero for longer than anticipated.

The kiwi traded at 75.66 US cents at 5pm in Wellington from 75.52 cents at 8.30am, up from 75.17 cents yesterday. The trade-weighted index rose to 78.36 from 78.10 yesterday.

The Federal Open Market Committee cited the strength of the US economy, according to minutes to its January meeting, while highlighting global risks to the outlook as threatening the case for an interest rate rise. That sapped demand for the greenback, which has been bolstered in recent months on the prospect of higher US interest rates after the Fed ended its quantitative easing programme last year.

"It was a lot more dovish that you'd expect with talk of concerns about Greece, Ukraine, you name it," said Tim Kelleher, head of institutional foreign exchange sales at ASB Institutional in Auckland. "The kiwi should head towards 76 US cents. That's quite a big level on the charts."

Kelleher said one caveat to put on the FOMC minutes was that the meeting was before the release of January non-farm payrolls data, which showed better than expected job growth in the world's biggest economy.

In New Zealand, the ANZ-Roy Morgan consumer confidence survey, published today, showedd households remained relatively upbeat, despite sentiment dipping in February.

Chinese markets were closed for the Chinese New Year holiday. The kiwi gained to 4.7329 Chinese yuan at 5pm in Wellington from 4.7135 yuan yesterday.

The local currency was little changed at 89.73 yen at 5pm in Wellington from 89.76 yen yesterday after the Bank of Japan confirmed it saw no need to print more money to stimulate its economy, and data today showed Japanese export growth accelerated at its fastest pace in more than a year.

The kiwi rose to 96.58 Australian cents from 96.31 cents yesterday, and gained to 66.24 euro cents from 66.06 cents yesterday. It edged down to 48.97 British pence from 49.08 pence yesterday.

The two-year swap rate decreased to 3.56 at 5pm in Wellington from 3.5825 yesterday, and the 10-year swap rate fell to 3.77 from 3.8025.

(BusinessDesk)