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NZ dollar slips after Australia data; Fed awaited

Published: 03 Nov 2009 21:03:37 PST

* Kiwi settles around $0.72, soft Aussie weighs

* Australia retail data dampens December rate hike thoughts

WELLINGTON, Nov 4 - The New Zealand dollar slipped on Wednesday after weak Australian retail sales data kocked back fellow high-yielder the Australian dollar, in trading subdued ahead of the outcome of the U.S. Federal Reserve's policy meeting.

The kiwi found support in the results of dairy giant Fonterra's latest online auction of wholemilk powder, which saw its average price rise by 13.7 percent on the previous month's auction. Dairy products account for around a quarter of New Zealand's export earnings [ID:nWEL459929].

"We are waiting to see what the Fed says regarding stimulus and inflation, the market will probably be just range trading ahead of tomorrow," said HSBC's treasury chief manager, Daniel Brdanovic.

The U.S. Federal Reserve ends its two-day meeting on Wednesday and, while it is expected to keep rates unchanged, there is speculation it might drop or alter its pledge to keep rates low for an "extended period" [nFEDAHEAD].

The kiwi <NZD=D4> was at $0.7191/97 at 0400 GMT compared with $0.7214/17 in Tuesday late local trading. It ranged between $0.7168 and $0.7231.

It was squeezed lower after data showed Australian retail sales unexpectedly fell in September. The data saw investors trim expectations of a further rate rise in December. See [ID:nSYD529174].

The kiwi showed little reaction to data showing the New Zealand government had a deficit of NZ$2 billion for the first three months of the fiscal year to Sept. 30, 77 percent worse than forecast. [ID:nWEL003886]

Finance Minister Bill English said the first signs of recovery were becoming evident but would take time to be reflected in the government's finances [ID:nWLF004432].

Third-quarter jobs data is due on Thursday with expectations unemployment will rise to 6.4 percent from 6 percent. [NZ/POLL]

Government debt was marginally firmer at the short end of the yield curve, but the benchmark 10-year bond <NZ10YT=RR> was unchanged at 5.69 percent.