NZ dollar gains as FOMC minutes show desire for more stimulus
By Jonathan Underhill
Aug. 23 (BusinessDesk) – The New Zealand dollar gained after minutes of the last Federal Reserve policy makers’ meeting
showed a widespread desire for more stimulus to underpin the world’s biggest economy. The greenback tumbled against the
yen after the minutes were released.
The New Zealand dollar rose to 81.32 US cents from 80.84 cents at 5pm in Wellington yesterday. The trade-weighted index
edged up to 72.85 from 72.73.
Minutes of the Federal Open Market Committee’s July 31-to-Aug. 1 meeting say many committee members “judged that
additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a
substantial and sustainable strengthening in the pace of the economic recovery.” That’s stoked speculation the Fed could
act in September making it a double-whammy month with action also expected from the European Central Bank.
“Most people seem to be aiming for September – it could make September a pretty massive month,” said Alex Sinton, senior
dealer at ANZ New Zealand. “The kiwi is going to be well supported.”
Still, “it is not an easy road higher for the kiwi,” he said. “The fact all this (central bank) activity is being
undertaken, you’re acknowledging the landscape is such that you have to take further action.”
Traders are looking ahead to the meeting of central bankers at Jackson Hole, Wyoming, as the next opportunity for
Federal Reserve chairman Ben Bernanke to hint at what form more stimulus could take.
“Bernanke is likely to say something that will be followed by the market,” Sinton said.
With central bankers in major economies needing act to underpin growth, New Zealand’s outlook is relatively benign,
reasonably supported by fundamentals and nominal yields on offer much better than available elsewhere, he said.
New Zealand 10-year bonds are yielding about 3.73 percent compared to about 1.7 percent for comparable 10-year
Treasuries and 1.44 percent for 10-year German bunds.
The kiwi traded at 64.96 euro cents from 64.87 cents yesterday and fell to 63.86 Japanese yen from 64.10 yen. Japan’s
currency strengthened to 78.53 per US dollar from 79.15 immediately before the FOMC minutes were released.
The New Zealand dollar traded at 77.42 Australian cents from 77.35 cents and was little changed at 51.24 British pence
from 51.22 pence.
(BusinessDesk)