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NZ dollar steady as weak GDP data meets forecasts
Reuters - Tuesday, December 23
WELLINGTON, Dec 23 - The New Zealand dollar <NZD=> was little changed on Tuesday as investors took weak growth figures as reinforcing expectations of further rate cuts, while the U.S. dollar held steady amid a deteriorating global economic outlook.
New Zealand's recession worsened in the third quarter, with gross domestic product falling a seasonally adjusted 0.4 percent, the biggest contraction in eight years, as spending, exports and investment weakened [nWEL371759].
The figures were in line with expectations of a 0.5 percent contraction, meaning little reaction in the kiwi.
"Some feared we might get a nasty GDP number and fall through the bottom. Nothing happened because we got exactly as expected," said Imre Speizer, a market strategist at Westpac Bank.
At 0400 GMT the kiwi was at $0.5739/46, compared with $0.5760/66 late in local trading on Monday. Support is seen around $0.5670/80 and resistance at $0.5810/20.
Analysts said the GDP figures pointed to a recession continuing well into 2009, a negative for the kiwi.
"The worsening in the recession will likely see further rate cuts and further weakness in the New Zealand dollar," said Shamubeel Eaqub, an economist at Goldman Sachs JBWere.
Most analysts see interest rates falling to 3.5 percent by the middle of 2009 from 5 percent. The next central bank rate review is on Jan 29.
The U.S. dollar held firm against the yen on deepening concerns over the Japanese economy following more gloomy data and a deteriorating economic outlook expressed by the Bank of Japan .
NZ dollar trading is expected to remain thin as market participants start shutting up shop for the Christmas-New Year holiday period.
New Zealand bonds rose slightly towards the close, with the yield on the benchmark 10-year bond <NZ10YT=RR> four basis points lower at 4.89 percent.
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