Kiwi rises above 73 USc as Federal Reserve meets

The New Zealand dollar rose above 73 US cents as financial markets await the outcome of the Federal Reserve policy meeting tomorrow and ahead of local balance of payments and economic growth data in the next two days.

The kiwi dollar climbed to 73.13 US cents as at 8am in Wellington from 72.78 cents late yesterday. The trade-weighted index rose to 76.25 from 75.97 yesterday.

Traders expect the Federal Open Market Committee to signal a reduction in the bank's monthly bond purchases as it prepares to reduce its US$4.2 trillion balance sheet and hint at a third quarter-point rate hike for the year, likely in December. Market bets put the odds of the third hike at 53 percent. The kiwi has gained ahead of this weekend's election, which polls show is a tight race.

"It has been an upward grind for kiwi over the past 24 hours and it is again knocking on the door of topside resistance," said Con Williams, rural economist at ANZ Bank New Zealand, in a note. "This has surprised us, as New Zealand's election remains too close to call. That said, it also reflects a softer USD ahead of a key FOMC meeting tomorrow morning."

Williams said the kiwi will meet resistance if it rises to 73.30 US cents, meaning there are market participants who would sell at that level, and would find support at 72.30 cents.

Second-quarter balance of payments data is out this morning and is expected to show the current account deficit remained at 3.1 percent of gross domestic product. GDP figures are due out tomorrow and are forecast to show growth accelerated to 0.8 percent in the second quarter from 0.5 percent three months earlier for an unchanged annual growth rate of 2.5 percent.

Traders will likely also be keeping an eye on the last leaders' debate tonight and any last polls ahead of the vote on Saturday.

The kiwi didn't move much after dairy product prices rose at the GlobalDairyTrade auction overnight, pushing the GDT price index up 0.9 percent. Whole milk powder increased 0.6 percent to US$3,122 a tonne.

The kiwi dollar was little changed at 91.29 Australian cents from 91.25 cents. It rose to 54.07 British pence from 53.76 pence and gained to 60.98 euro cents from 60.77 cents. It rose to 81.56 yen from 81.24 yen and gained to 4.8126 yuan from 4.7954 yuan.

(BusinessDesk)