New Zealand dollar steady as investors watch US Government shut down

The New Zealand dollar was unchanged in the local session as investors took a wait-and-see stance on developments in Washington after the US federal government shut down and legislators remained at an impasse on a temporary funding agreement.

The kiwi traded at US72.81c at 5pm, unchanged from 8am, and barely budging from US72.75c on Friday in New York. The trade-weighted index was at 74.85 from 74.77 last week.

Talks between Republican and Democratic leaders of the US Senate continued yesterday in Washington, but Reuters reported the shutdown will enter its third day today when negotiators failed to reach a deal.

Robert Rennie, chief currency strategist at Westpac Banking Corp in Sydney, said markets were largely quiet in Asia as investors wait to see how US markets react later in the global trading day.

"Net-net we are waiting for overnight markets to give us a bit of direction," he said.

Still, the muted reaction in Asia may be because people have learned from history that any impact of a shutdown tends to be minimal.

"If you look back over previous shutdowns, then it kind of says let's not get too excited," he said.

Domestic trading was also quiet yesterday with Wellington out for an anniversary day holiday.

Rennie said he expects the kiwi to trade close to US72.75c to US73c ahead of the fourth-quarter inflation data on Thursday, the main event for the kiwi this week.

Economists expect the consumers price index rose 0.4 per cent in the three months ended December 31, for an annual increase of 1.9 per cent, according to the median in a poll of 13 economists surveyed by Bloomberg.

The kiwi edged up to A91.08c from A90.97c on Friday in New York and increased to 4.6628 Chinese yuan from 4.6553 yuan. It traded at ¥80.64 from ¥80.58 last week and at 52.48p from 52.45p. The kiwi traded at €59.52c from €59.29c last week.

New Zealand's two-year swap rate rose 3 basis points to 2.29 per cent while the 10-year swap rose 5 basis points to 3.29 per cent as US Treasury yields continued to push higher.